“Many companies, including giants Nvidia and Qualcomm, will likely partner with Intel for packaging and/or wafer capacity, and this seems to be going somewhat unnoticed.”
I’m bullish on Intel for three main reasons: the leadership of Chief Executive Pat Gelsinger, the company’s strong ecosystem and Intel’s
INTC,
ambitious foundry business — which has perhaps found the perfect moment to become the most important driver of Intel’s future.
Open AI CEO Sam Altman drew widespread attention recently when he appealed for up to $7 trillion to develop silicon-chip manufacturing capacity that can power artificial intelligence. The unprecedented scope of this vision, equal to more than 20% of U.S. GDP, captured the imagination of the world. Here was the person who brought AI to the masses saying that the chip industry currently lacks what it will take to support the development of fabs, data centers and infrastructure.
At first, Altman’s $7 trillion price tag seemed absurd to me, just based on its size, but the more I considered it, the more I came to see the investment required to build chips that will be 10x, 100x or even 1,000x as powerful by the end of this decade. It’s going to take massive investment, and while it’s provocative to think Altman will want to go at it alone, it is perhaps more interesting to think of which partners Altman will want to bring with him.
Chipmaker for the West
Intel aims to be the chip manufacturer for the West, while Altman wants to reimagine the global supply chain and industry for AI chips. Perhaps it is time to ask if its mere coincidence that Altman, Microsoft
MSFT,
CEO Satya Nadella, U.S. Secretary of Commerce Gina Raimondo, and a host of global semiconductor business leaders from the likes of Arm Holdings
ARM,
Broadcom
AVGO,
Synopsys
SNPS,
Cadence Design Systems
CDNS,
Ansys
ANSS,
and others will converge on Wednesday at Intel’s foundry event in San Jose, Calif.
Intel will be providing an important set of updates on its foundry strategy. While Intel’s foundry business has been one of its biggest bright spots over the past few quarters, including a 63% jump in its fiscal fourth quarter, it still feels like this is an underappreciated asset within the Intel portfolio — especially given that Taiwan Semiconductor Manufacturing Co.
TSM,
runs an operating margin of ~40%.
Much focus has been given to whether Intel can get traction with its own AI graphics processing unit and silicon. So the fact that many companies, including giants Nvidia
NVDA,
and Qualcomm
QCOM,
will likely partner with Intel for packaging and/or wafer capacity seems to be going somewhat unnoticed.
Read: Intel stock is not valued even close to its competition
My take: It is far from coincidence, and based upon the mere scale of AI, there is a desperate need for expanded capacity and advanced foundry capabilities in the U.S. and other western geographies like Europe and Israel. Consider this week a coming-out party for Intel, for those that haven’t been following this closely.
I recently spoke with Gelsinger in advance of Wednesday’s Intel event. While he wouldn’t comment directly on what Altman or Raimondo would be speaking on, the Intel CEO did allude to the incredible scale of AI and the orders of magnitude of performance and power management that would be required over the next decade. To me, it’s clear there is a perfect opportunity here for Intel, government policymakers and Altman to collaborate on meeting the need for AI semiconductors. Intel makes for both a willing and ideal partner.
The technology industry, and more specifically the semiconductor industry, and U.S. policy leaders see the immense value in a strong U.S.-based foundry for leading-edge and AI chips. Intel is the only company that has stepped up to do this for the West. Taiwan Semiconductor certainly has a massive role to play, but to build out capacity for AI chips in the future, the moment is all Intel.
Daniel Newman is CEO and chief analyst at The Futurum Group, which provides or has provided research, analysis, advising or consulting to Intel, ServiceNow, NVIDIA, Microsoft, Amazon, IBM, Oracle and other technology companies. Neither he nor the firm have any positions in any of the other companies cited. Follow Newman on X @danielnewmanUV.
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