Intel's secret weapon in the AI ​​war: low prices

Nvidia (NVDA 1.25%) currently dominates the market for artificial intelligence (AI) accelerators, with a market share that some estimates place above 90%. The company's AI chips are expensive, but customers are willing to pay to be part of the AI ​​revolution.

Intel (INTC -0.86%) will launch the third generation of its Gaudi AI accelerators later this year. The company had a roughly $2 billion AI chip-related backlog a few months ago, even though it only expects to generate about $500 million in Gaudi 3 sales in 2024. The slow build-up power may be due to supply constraints.

Nvidia's lead and mature software ecosystem around its AI chips will make it hard to beat. Intel is working with others in the industry to standardize an alternative to Nvidia's proprietary CUDA platform, although that effort will take time. The second part of Intel's AI strategy is to offer potential customers significant cost savings over Nvidia's solutions.

Sale price

Intel made numerous AI-related announcements at Computex this week. There have been some high-profile updates on the company's upcoming Lunar Lake laptop chips and its new line of server processors, but the company also provided few details on the pricing and availability of its gaming accelerators. AI Gaudi.

First, Intel is expanding the network of system suppliers to offer Gaudi 3 systems. While Intel was already working with Dell, Hewlett Packard Company, LenovoAnd Supermicro, the company now also collaborates with Asus, Foxconn, Gigabyte, Inventec, Quanta and Wistron. These new partnerships are expected to expand the reach of the Gaudi 3 systems when they become available this year.

Second, Intel announced attractive pricing for system vendors, an unusual move intended to highlight the value proposition of its Gaudi chips. An AI kit including eight latest-generation Gaudi 2 AI chips and a universal base board will cost system suppliers $65,000, while a version with eight Gaudi 3 AI chips will cost $125,000. Intel estimates that the price of these kits is one-third and two-thirds, respectively, of the cost of comparable competing platforms.

While Intel undercuts Nvidia, the company expects its chips to perform impressively. The company estimates that a cluster of 8,192 Gaudi 3 chips can train an AI model up to 40% faster than a cluster with the same number of Nvidia H100 chips. Intel also claims that Gaudi 3 delivers up to two times better AI inference performance than the H100 running popular open source models.

Looking towards 2025

Nvidia's H100 will be replaced later this year by the company's Blackwell GPUs, which will offer significant advancements in performance and efficiency. Another thing that will likely increase is the price. So even though Gaudi 3 may lose in raw performance, the value proposition of Intel's AI chips will likely remain strong.

2025 will be a key year for Intel's AI accelerator business. The company is expected to have better control over supply as it ramps up production of its Gaudi 3 chips. With demand for AI chips still booming, Intel could see a surge in Gaudi chip sales next year as customers look for cost-effective alternatives to Nvidia's market-leading products.

Although Nvidia will almost certainly continue to dominate the AI ​​accelerator market, Intel could gain significant market share if its aggressive pricing resonates with potential customers.