Intel (INTC, Financial), the chip maker who returned to sales growth this year after seeing its revenue stagnate in 2015, has been doubling down on its efforts to capitalize the growth opportunity in the Internet of Things and datacenter markets.
"Second-quarter revenue matched our outlook and profitability was better than we expected," said Brian Krzanich, Intel CEO. "In addition, our restructuring initiative to accelerate Intel’s transformation is solidly on-track. We're gaining momentum heading into the second half. While we remain cautious on the PC market, we’re forecasting growth in 2016 built on strength in data center, the Internet of Things and programmable solutions.”
In line with that focus, the company is trying to give a serious run for NVIDIA’s (NVDA, Financial) money in the artificial intelligence segment with its Xeon Phi processor. NVIDIA is the defacto leader in the AI chips segment, with almost all the big companies involved in the deep learning area as clients.
Intel’s Xeon Phi processors will be competing with NVIDIA’s GPU processors and, recently, Intel fired a salvo at NVIDIA, claiming that its processors are superior to their rival's.
Intel’s Claim:
- Xeon Phi delivers strong scaling to 128 nodes while GPUs do not
- Xeon Phi offers 38% better scaling than GPUs across nodes
- Xeon Phi delivers strong scaling to 128 nodes while GPUs do not
NVIDIA’s response:
Source: NVIDIA
As you can see, the growth of cloud has created an arms race of sorts in the artificial intelligence segment, especially in the deep machine learning market. All the big tech companies - Facebook (FB, Financial), Microsoft (MSFT, Financial), IBM (IBM, Financial), Amazon (AMZN, Financial), Apple (AAPL, Financial), Google (GOOGL, Financial) and many more - are building their expertise in that area; and let’s not forget the effort from the auto industry as well. Nvidia’s Datacenter segment, fueled by the demand from deep learning, posted a record 109% growth during the second quarter of the current fiscal, with revenues racing to $151 million compared to the previous year’s $72 million.
The segment is obviously growing at a fast pace and NVIDIA is staying at the top without any real competition. There is plenty of opportunity in the market, as it can only grow bigger from here. Intel, realizing this, is stepping up to the plate and wants to position its processor directly against Nvidia’s.
“Intel Corp. told technology developers Wednesday that it plans next year to deliver a new version of the Xeon Phi processor—a product line previously targeted at scientific applications—with added features designed to accelerate tasks associated with what Silicon Valley calls artificial intelligence.” - WSJ
Though this may not have an immediate impact on either company’s top line in the immediate future, the datacenter segment is where both these companies are set to cross swords in the long term. With ample space in a growing market, both companies will soon become a duopoly and stay there for a very long time.
Disclosure: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.
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