Nvidia (NVDA 0.03%) is known as the world's top seller of artificial intelligence (AI) chips because its product has been unbeatable so far. The company makes the most powerful chip out there today, helping companies power the tasks of training and inferencing for their AI models. This has helped Nvidia's earnings soar in the triple digits last year -- and its share price followed, with an increase of more than 200% over the past year.
Meanwhile, rival Intel (INTC -1.63%) hasn't fared as well. Lower personal computer demand in recent times has weighed on revenue. On top of this, Intel fell behind in the artificial intelligence (AI) chip race. All of this has left its shares trading at half their 2020 level.
The tide may be about to turn, though, as Intel ramps up its AI portfolio. Just this week, the company announced its new AI chip Gaudi 3. Can this new product send Intel soaring past Nvidia?
Image source: Getty Images.
Gaudi 3's performance
Let's start with some details about this new Intel chip. The company says Gaudi 3 offers 4x more AI compute and a 1.5x increase in memory bandwidth, compared to its predecessor.
Importantly, Intel's new chip may challenge Nvidia's top-performing graphics processing unit (GPU), the H100. The Gaudi 3 may deliver a 50% faster training time than the H100 when used on certain large language models (LLMs) -- for example, Llama 2.
Its inference throughput could outperform the H100 by an average of 50%, and the product is more power-efficient than Nvidia's, too. Intel didn't offer a price range for the Gaudi 3 but said it delivers superior performance to the H100 "at a fraction of the cost." The company plans to make Gaudi 3 available to companies that build platforms with these chips in the second quarter.
Does this mean Intel could be on the way to unseating Nvidia? Not necessarily.
It's important to remember that the Gaudi 3 performance levels are "on average" and using certain LLMs at specific parameters. And Nvidia isn't sitting still when it comes to product innovation. The company recently announced its new Blackwell architecture, and its most powerful chips ever, the B100, are set for release later this year.
Even if Intel's Gaudi 3 outperforms the H100, it's very likely Nvidia will surge into the lead from a performance perspective when it releases the Blackwell platform. I don't see Gaudi 3 as a threat to demand for Nvidia's products or the company's long-term earnings prospects.
An important catalyst for Intel
I do see the product as an important catalyst for Intel's earnings and share-price performance. Demand for AI chips is high and likely to keep on growing -- with the AI market forecast to reach more than $1 trillion by the end of the decade. It's unlikely that just one company will serve all of this demand.
Here's another point to keep in mind: Cost is a significant factor that comes into play for many companies as they launch AI programs, and some of them don't necessarily need the world's most powerful chip. This leaves plenty of room for a high-quality product offering great performance at a reasonable price to carve out a spot in the market.
Intel probably won't soar past Nvidia to become the world's biggest AI chipmaker, but the Gaudi 3 could offer the company a much-needed boost to earnings. As more and more companies -- with a wide range of budgets and needs -- launch AI programs, opportunities will multiply for Intel and other companies producing high-performance chips. Intel's focus on performance at a lower cost could help it carve out a niche.
An Intel survey of 430 tech professionals showed that only about 10% of their organizations had sent generative AI models to production last year. This reinforces the idea that we're in the early days of the AI boom.
As for share performance, if Gaudi 3 and Intel's other new AI products take off, Intel stock could beat Nvidia when it comes to percentage gains. After declining 45% over the past three years, Intel is ripe for recovery. Trading for 27x forward earnings estimates means the stock is reasonably priced.
While the Gaudi 3 launch isn't bad news for Nvidia, it's definitely great news for Intel and its shareholders.
