Intel's (INTC +13.79%) 2022 investors meeting, which was held on Feb. 17, provided a lot of insight into the chip giant's plans in different areas of its business. But it was the accelerated computing systems and graphics business that revealed the company's plans to take the fight to two of its biggest rivals -- Nvidia and Advanced Micro Devices.
The accelerated computing systems and graphics group, or AXG, could become a huge growth driver for Intel. This business segment is unlike the client computing group (CCG) or the data center group (DCG), where Intel already enjoys a dominant position.
Intel is a greenhorn in the discrete graphics processing unit (GPU) space, which is currently dominated by AMD and Nvidia, but it believes that it could take a sizable chunk out of this market in the next five years. Let's see how AXG could supercharge Intel stock in the long run.
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Intel sees solid growth in graphics cards
Intel is forecasting $1 billion in revenue from the AXG business this year, which would be a small fraction of the company's estimated 2022 revenue of $76 billion. Intel expects AXG revenue to increase to an annual run rate of $10 billion by 2026, as it is targeting several fast-growing opportunities within this market.
For instance, Intel expects to ship 4 million units of its consumer-grade Alchemist GPUs in 2022. Intel's discrete GPUs have already landed more than 50 design wins across several original equipment manufacturers (OEMs) such as Acer, Asus, Samsung, Dell, MSI, HP, Lenovo, and others. Chipzilla will start rolling out its discrete GPUs this quarter in notebooks, followed by desktop-compatible graphics cards in the second quarter, and workstation-specific cards in the third quarter.
If Intel hits its annual shipment target, it could carve out a nice chunk of the discrete GPU market in 2022. That's because 42 million discrete graphics cards were sold in 2020, according to Jon Peddie Research, followed by 37 million units in the first nine months of 2021. Intel's 4 million target indicates that the chipmaker is looking to corner 10% of this lucrative space this year.
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Key Data Points
That would be great news for investors, as the discrete GPU market could hit $54 billion in revenue by 2025, according to Jon Peddie Research. Nvidia is the dominant player in this space with a market share of 81%. AMD controls the rest of the discrete GPU market. Intel can now provide consumers with a viable third alternative, which would be a good thing for gaming enthusiasts, as its Alchemist cards will come equipped with ray tracing and resolution upscaling technology.
So Intel could chip away at Nvidia and AMD's discrete GPU market share this year and set the stage for further growth in this segment with the launch of future generations of graphics cards in 2023 and 2024. Assuming Intel does manage to score 10% of the discrete GPU market by 2025, it could generate at least $5 billion in revenue from this space based on Jon Peddie Research's forecast.
This, however, is not the only catalyst that could drive Intel's AXG business.
Chipzilla is aiming for another huge vertical
Intel claims that more than 85% of the supercomputers in the world are powered by its Xeon server processors. The company plans to use its robust position in this market to introduce data center GPUs that will be capable of tackling high-performance computing (HPC) and artificial intelligence (AI) workloads.
Chipzilla is already anticipating 35 design wins from OEMs and cloud service providers for its accelerated computing solutions for the data center market. Intel says that its Ponte Vecchio data center GPU is 2.6 times more powerful than the competition's "leading market solution on a complex financial services workload." The Aurora supercomputer at the Argonne National Laboratory -- a research center of the U.S. Department of Energy -- will be using six of Intel's Ponte Vecchio GPUs later in 2022.
It is worth noting that the Ponte Vecchio is capable of exascale computing, which will allow it to tap into a market that's expected to hit $7.7 billion in revenue by 2026, according to a third-party estimate. Meanwhile, the overall data center GPU market is estimated to hit nearly $21 billion in value by 2026, which means that the chip giant could tap into a much bigger opportunity over here.
As a result, it wouldn't be surprising to see Intel's AXG business generate $10 billion in annual revenue after five years -- those dollars represent plenty of reason to buy shares today. However, investors shouldn't rule out the possibility of this segment generating more revenue than Intel's expects, as the company's roadmap indicates that it is planning to launch an integrated data center CPU (central processing unit) and GPU architecture in 2024, known as Falcon Shores.
Intel says that the Falcon Shores architecture can "deliver benefits of more than 5x performance-per-watt, 5x compute density, 5x memory capacity and bandwidth improvements." This could unlock a solid opportunity for Intel, as the adoption of single-socket servers is expected to increase in the long run, and Chipzilla could bring a ground-breaking product by integrating both the CPU and the GPU into a single architecture.
Currently, the data center GPU market is dominated by Nvidia, with a more-than-80% share. AMD controls 10.7% of the data center CPU market and Intel commands the rest, indicating that the latter could hurt both its rivals with an integrated chip. So Intel could win big from the accelerating computing and graphics market in the long run, giving investors another reason to bet on this semiconductor stock that's gunning for a turnaround.
