Chat-powered AI boom is helping rewrite the winners and losers of the chip market

Kareem Anderson

Intel Vs. Nvidia Chipmakers Bing Image Creator

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Earlier today, NVIDIA’s stock crossed the $1T market cap with shares trading around $409 for the day, just above the $404.86 mark needed to snag a spot among the trillion-dollar business club.

The rise in market evaluation comes nearly a week after the discrete graphics processing unit maker posted exceedingly high returns for its Spring quarterly earnings, beating both top and bottom-line estimates that had the GPU manufacture producing $7.5 billion in sales whereas the actual haul was around $11 billion for previous three months.

NVIDIA joins the cabal of chipmakers who are benefiting from a rise in both crypto mining and generative artificial intelligence which have put their products front and center on the supply and demand stage. While NVIDIA has stood head and shoulders above its competition in the discrete GPU field, it recently joined a wave of general chip makers such as AMD, TSM, and Qualcomm, who have companies now vying for SoCs that help power all new ChatGPT-like products in recent months.

While NVIDIA joins trillion-dollar market cap holders such as Apple, Alphabet, Amazon and Microsoft, buoyed by shares that are up 160 percent year to date, industry stalwart Intel is drowning in a sea of its own missteps.

Intel’s central processing unit manufacturing set the company up for wild success in the 80’s and 90’s where specialized computing tasks weren’t a common occurrence, but in an age of multifaceted computing, Intel continues to struggle to pivot toward more modern chip designs. In the 2000’s, Intel attempted to rebrand itself as a fab that could produce chips for smartphones and high-end GPUs, but was usurped by Qualcomm, Samsung and now TSMC in designing small and power efficient processors.

In a seemingly last-ditch effort, Intel, led by CEO Pat Gelsinger is attempting to evolve the company into a foundry where it can produce the chips for more in-demand players such as Tesla, Qualcomm, Tower Semiconductor, and more.

Intel’s foundry transition continues to be a slow and pock-marked affair with several partners either pulling out of or pausing previous commitments according to The Wall Street Journal.

It is slowing installation of multimillion-dollar chip-making equipment in new factories to match chip demand. A $200 million research center in Haifa, Israel—the first major project Gelsinger announced after taking over—was scrapped. So was a $700 million lab planned in Oregon. A jet service that shuttled employees between manufacturing hubs in Oregon and Arizona and Intel headquarters in Silicon Valley was put on hold.

Intel’s woes fly in stark contrast to NVIDIA’s recent success as well as the company’s own estimates that have Gelsinger believing the market demand for chips to surpass $1 trillion by the end of the decade.

While NVIDIA is riding Gelsinger’s predicted influx of chip demand, his own company posted its worst quarter loss in history as well as cut investor dividends, and enacting further job-cutting actions such as layoffs, lowered executive pay and enacting a plan to cut up to $10 billion in annual cost in the next two years.

Needless to say, Intel has more to worry about than simply capitalizing on generative AI to bring its company and stock back in line with other businesses using the likes of ChatGPT to fuel their recent evaluations.

Domestically speaking, Intel has a bit of the nation at its back with the recently passed Chips Act which allocated up to $53 billion in funding to businesses such as Intel in building out its foundry foundation in the United States, but has yet to snag any major product makers such as Apple, NVIDIA, Qualcomm as customers, despite being in almost year-four of their planned transition. Intel has managed to onboard MediaTek and Seagate for “less-advance” chips designed for smart TVs, Wi-Fi modules, and external hard driver suppliers.

With Intel unable to internally design chips to meet more modern-day computing needs and also having trouble securing deals with chip makers who are in high demand for specialized chips to power the likes of AI and crypto mining, investors are left wondering if the company’s bet on being the foundry of note for this boom in chip demand is in the midst of missing its window of opportunity.

Intel’s stock is down roughly 30 percent, underperforming the semiconductor index, and trailing its competition by a value of 4 to 8 times lower since Gelsinger returned to the company and announced its new plan of action.