5 Reasons AMD is Outpacing Intel

5 Reasons AMD is Outpacing Intel. AMD and Intel Earnings Show the Shift Beyond AI

Next week marks a significant event for the tech sector. AMD and Intel, two major players in the semiconductor industry, will release their earnings reports. Investors will be looking for insights, not just about artificial intelligence (AI), but about broader trends. These earnings will shed light on the changing dynamics in the chip market, particularly in the data center space. While AI has dominated the news, other shifts are also influencing the performance of these companies. 5 Reasons AMD is Outpacing Intel

Market Valuations: AMD Surging, Intel Falling

A striking indicator of the shift is in the companies’ market valuations.  Meanwhile, AMD’s value has surged to $248 billion. The perception of each company’s role in the AI boom plays a role here. However, another significant factor is their positions in the data center market. Intel, once a leader in this space, has seen declining revenue, impacting its broader strategy. AMD, on the other hand, has gained significant ground.

Data Center Market Struggles for Intel

The x86 server market, long dominated by Intel, has been under pressure. AI accelerators from companies like Nvidia are taking priority in data center spending. While overall demand for servers has slowed, AMD’s share in this market is growing. According to Stacy Rasgon, a Bernstein Research analyst, “the whole x86 server market has been under pressure.” Despite the slower market, AMD’s performance has been far better than Intel’s. AI-related spending is taking precedence, shifting away from new data center processors.

AMD’s Strong Earnings Expectations

Analysts predict a 15.7% increase in AMD’s revenue for the third quarter, reaching $6.7 billion. But the real standout will be AMD’s data center business. It is expected to see a massive 118% rise, bringing sales to $3.3 billion. AMD’s new server chips are increasingly popular with customers, leading to larger market share gains. AMD CEO Lisa Su emphasized these gains during the company’s recent Advancing AI Day.

Kevin Krewell of Tirias Research highlighted the robust adoption of EPYC, especially among hyperscalers in the cloud computing space. The EPYC line has allowed AMD to further erode Intel’s dominance in data centers.

Intel’s Struggles Continue

For Intel, the outlook is less rosy. Analysts expect its revenue to decline by 8%, falling to $13 billion. Intel’s data center business is also facing a significant 15.2% drop, with revenue expected to fall to $3.4 billion. This is a far cry from its peak of $7.3 billion in late 2021. The company’s grip on the data center market continues to weaken, with AMD steadily gaining ground.

Intel’s efforts to pivot towards a contract manufacturing strategy have yet to show significant results. The company is also in the process of cutting 15,000 jobs as part of a $10 billion cost-saving plan. Investors are eager for any signs of improvement, whether through new contracts or progress in Intel’s foundry business.

 

AMD’s Growing Data Center Market Share

Meanwhile, Intel’s share fell to 75.9%, down from 81.4%. The data center space, which was once Intel’s stronghold, has become a battleground where AMD is making steady gains.

PC Market Slump Affects Both Companies

Both AMD and Intel are grappling with a sluggish personal computer (PC) market. Despite hopes for a refresh, PC sales remain slow. The anticipated boost from AI-enhanced PCs, as well as a new version of Microsoft Windows, has not yet materialized. Both companies may address this in their earnings calls, but the market remains uncertain.

AI Is the New Battleground

While both companies face challenges, AI remains the key area of interest. Nvidia dominates the AI chip market, leaving both Intel and AMD playing catch-up. These chips compete directly with Nvidia’s offerings. However, Wall Street remains cautious about AMD’s AI prospects, as it is still behind Nvidia.

Intel’s AI efforts have been slower to yield results. The company’s latest AI accelerator chip, Gaudi 3, was launched in September. IBM has already announced plans to use Gaudi 3 in its cloud services starting next year. Despite this, Intel’s AI revenue is expected to be around $500 million this year, a small figure compared to Nvidia’s dominance. Analysts predict Nvidia will generate $28.9 billion in data center revenue alone in the current quarter, far outpacing both Intel and AMD combined.

Intel’s Cost-Cutting Strategy

Intel’s struggles have led the company to focus on reducing costs. Its $10 billion cost-cutting strategy includes the planned elimination of 15,000 jobs. Investors are hoping this will improve Intel’s profitability and help it regain ground in its core markets.

Rivalry in AI Chips

While both AMD and Intel trail Nvidia in AI, they are still competing with each other in this space. AMD’s data center business has been performing well, thanks to its AI chips. Intel, on the other hand, is still trying to carve out a space for itself in this market. The launch of Gaudi 3 is a step in that direction, but Intel has a long way to go before it can rival Nvidia or even AMD in AI.

Conclusion: A Shift in the Chip Industry

The rivalry between AMD and Intel is evolving. While AI is the hot topic, the real battle is playing out in the data center market. AMD’s strong performance in this area has given it a significant advantage over Intel. As the technology landscape shifts, it’s clear that AMD is gaining ground, while Intel is struggling to keep up. The coming earnings reports will provide a clearer picture of how these trends are shaping the future of both companies.