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Intel Launches a Broadside at AMD and Nvidia as It Guns for a Turnaround

By Harsh Chauhan – Jan 7, 2022 at 11:52AM

Key Points

  • Intel's discrete graphics cards have been selected by 50 manufacturers for use in their laptops and desktops.
  • Its graphics cards are based on a competitive manufacturing process that could give rivals a run for their money.
  • Intel could win big from the discrete graphics card market if it could corner even a small share of this space from the likes of AMD and Nvidia.

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The chip giant's recovery could get a boost thanks to this move.

Intel (INTC 1.81%) stock has been in turnaround mode since crashing heavily after the release of its third-quarter results on Oct. 21, 2021, as there have been signs of a turnaround in Chipzilla's business thanks to its new products.

For instance, Intel's latest Alder Lake central processing units (CPUs) are reportedly gaining market share against Advanced Micro Devices (AMD 1.86%), as they are based on a competitive manufacturing process, are priced aggressively, and can deliver solid performance. And now, Intel is looking to turn up the heat with the launch of its Arc (codenamed Alchemist) discrete graphics processing units (GPUs) that could help it seize a lucrative market that is currently dominated by Nvidia (NVDA 1.48%).

Let's take a closer look at Intel's latest move in the multi-billion-dollar graphics cards market and check how this could be a big deal for the chip giant's comeback efforts.

Chart showing rise in Intel's price since November 2021.

INTC data by YCharts

Intel enters the discrete graphics cards market with a bang

On Jan. 4, Intel announced that it has begun shipments of its Arc discrete graphics cards. What's worth noting is that Chipzilla's discrete GPU designs have been selected by 50 laptop and desktop OEMs (original equipment manufacturers) that include the likes of "Acer, ASUS, Clevo, Dell, Gigabyte, Haier, HP, Lenovo, Samsung, MSI, and NEC."

The likes of Lenovo have already started making devices powered by Intel's discrete GPUs. Meanwhile, Acer is reportedly going to launch the world's first laptop powered by the chipmaker's discrete graphics cards. More importantly, it won't be surprising to see more OEMs select Intel's Arc chips, as the company is striking partnerships with game studios so that their titles support the technology its GPUs are packing.

Person with headphones looking at a computer screen and smiling.

Image source: Getty Images.

Intel's Arc GPUs are equipped with ray-tracing technology. They also sport artificial intelligence-powered resolution upscaling and a proprietary Deep Link technology that Intel says can accelerate many workloads if the computer also features a compatible Intel processor. These features indicate that Intel is serious about making a dent in the discrete GPU market, as its cards are packed with technology on par with rivals.

For instance, Nvidia has been offering ray-tracing on its graphics cards for quite some time now, with more than 150 gaming titles supporting the technology that gives gamers an immersive experience. Meanwhile, Nvidia's cards are also equipped with deep learning super sampling (DLSS), a feature that improves the games' image quality and resolution.

So, Intel is looking to get into the GPU market with all guns blazing, and that could substantially boost the company's revenue in the long run. Here's why.

Chipzilla can seize a massive opportunity

Intel will be the third player in the discrete GPU market after Nvidia and AMD. According to Jon Peddie Research, Nvidia commanded 83% of this space in the third quarter of 2021, while AMD was left with the remaining 17%. Nvidia has dominated the graphics card market with an iron hand thanks to its robust supply chain and competitive RTX 30 series cards.

So, going after Nvidia would be an ambitious target for Intel right now, but it can mint big money even if it manages to take some share away from AMD. After all, Jon Peddie Research estimates that the discrete GPU market could be worth $54 billion in 2025 as compared to $23.6 billion in 2020. Now, it won't be surprising to see Intel eat into AMD's market share for a couple of reasons.

First, Intel's Arc GPUs are manufactured using  TSMC's N6 process that's based on a 6-nanometer (nm) manufacturing node. That makes it smaller than AMD's current generation of graphics cards that are based on a 7nm manufacturing process.

A smaller manufacturing node means that the transistors on Intel's graphics cards will be packed more closely together. As a result, they should ideally be more powerful since they can carry out more calculations thanks to closely packed transistors while generating less heat, making them more power-efficient. This power-sipping profile could boost the adoption of Intel's discrete graphics cards and help the chipmaker take share away from AMD.

The second reason Intel's graphics cards pose a threat to AMD is the former's dominant share in the CPU market. Mercury Research estimates that Intel controls 75% of the global PC (personal computer) processor market. Now that Chipzilla is offering a Deep Link technology that promises to boost the performance of machines that will be powered by a combination of Intel CPUs and GPUs, customers may be enticed to opt for an Intel GPU to generate stronger performance from their devices.

Of course, it remains to be seen how Intel's GPUs will perform in the real world, but leaks indicate that the company's entry-level graphics card can hold its own against Nvidia's mid-range offerings such as the RTX 3050 Ti laptop graphics card.

In all, Intel seems to be entering the GPU market on a promising note. If the chipmaker can corner even 10% of this market in the next couple of years, it could add billions of dollars to its revenue that may act as a catalyst for the tech stock in the long run.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.

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