The graphics card market had been a two-horse race for many years. Nvidia (NVDA -3.22%) has been at it since the company was founded in 1993, and Advanced Micro Devices (AMD -0.34%) entered the market with the acquisition of ATI in 2006. It's been Nvidia and AMD battling each other since then, with Nvidia generally coming out on top in terms of market share.

This year brought a third player into the mix: CPU giant Intel (INTC 1.53%). Intel is not new to the graphics business -- many of the company's PC CPUs include integrated graphics chips, and the company briefly sold stand-alone graphics cards in the late 1990s. But as video games have exploded in graphical complexity, and as graphics cards have found applications outside of gaming, Intel has largely been stuck on the sidelines.

A strong but messy start

Intel is on the sidelines no more, although there was some sloppy execution along the way. Intel's first graphics card, the Arc A380, targeted the low end of the market and initially launched in China. Gaming performance wasn't particularly good or consistent, and issues with software drivers only made things worse.

It turns out that Intel had attempted to take a shortcut on the software side, using its integrated graphics software as a foundation. That software couldn't provide adequate performance, leaving Intel playing catch-up as it readied the launch of its mid-range Arc A750 and Arc A770 graphics cards. Rumors emerged that Intel was scrapping the whole effort as it struggled to bring competent products to market.

Intel did eventually launch those graphics cards, and they received generally positive reviews. Tom's Hardware called the Arc A770, priced at $329, a "potent mainstream competitor," praising its performance for the price. Software was still a problem at launch, particularly for older games, but Intel has made strides to fix its mistakes.

Intel was forced to abandon its goal of shipping 4 million graphics card units this year as software issues pushed back launch dates, but the company is in a good position to be a major player in the mainstream graphics card market in 2023 and beyond.

A massive opportunity

Jon Peddie Research expects the market for discrete graphics cards to grow to $39 billion by 2026, up from just under $32 billion over the past 12 months. The market is in flux right now -- demand for PCs has plunged, and excess inventories of last-gen graphics cards have triggered board partners to cut way back on orders. Unit shipments were down nearly 32% year over year in the third quarter as a result.

Even in a tough market, Intel has priced its cards aggressively enough to make a splash. The company only competes in the mid-range -- the A750 and A770 are priced at $289 and $329, respectively -- but that's where the most popular graphics cards live. According to Steam's hardware and software survey, the top seven most-used graphics cards on the platform are mid-range cards from Nvidia. By focusing on the mid-range, Intel is going after a high-volume portion of the market.

If AMD's experience trying to win at the high end of the market is any indication, Intel may never even make a real attempt. AMD's latest high-end graphics cards represent its best effort in years, but they still fall short of Nvidia's products, particularly when it comes to ray tracing performance. If Intel does make a run at the high end, it's probably not going to happen anytime soon.

Even if Intel sticks to mid-range and low-end graphics cards, a big chunk of the $39 billion market will be up for grabs. The company's relationships with PC OEMs certainly give it a leg up, and its software will only improve over time. Intel is on a path to becoming a solid player in the graphics card market, generating billions of dollars in revenue each year.