Intel (INTC) is gearing up for a massive transformation in an attempt to revive the former chip giant. While the company is showing early signs of recovery -- its latest earnings beat expectations on the back of a strong performance in its data center products -- it's not quite on its feet just yet.
Meanwhile, long-time rival Advanced Micro Devices (AMD) is closing the gap with Intel, taking market share from the once global chip leader in the data center and personal computer (PC) markets.
At AMD's Financial Analyst Day in New York on Tuesday, CEO Lisa Su said that with its Epyc series of chips, she expects AMD's share of the server central processing unit (CPU) revenue market to exceed 50% in the next three to five years. The company currently has a 40% revenue market share in this segment.
Su also noted that revenue from AMD's client business, which covers gaming and PC chip sales, is expected to grow 10%. Overall, AMD's client business revenue market share is expected to increase from the current 28% to more than 40%.
According to analysis by Mercury Research, this will reduce Intel's client market share from about 72% to about 60%, which is a significant drop for Intel. Currently, Intel and AMD are the only two companies making chips based on the x86 architecture—chips that use the x86 processing architecture, which is architecturally different from chips based on ARM or Nvidia architecture.
Stacey Rasgon, an analyst at Bernstein Research, said in a note to investors that AMD's expectations are "slightly aggressive and aspirational, but not completely impossible to achieve."
Of course, there is no absolute certainty whether Su Zifeng’s prediction can be fulfilled. Companies often publish short-term or long-term expectations, which may ultimately fall short of expectations or exceed expectations, but the risks faced by Intel are real.
"With its EPYC chips, AMD has executed extremely well in the (data center) CPU space, not only winning a large number of orders from large hyperscale data center operators, but also continuing to expand its share in the enterprise market," Daniel Newman, CEO of The Futurum Group, told Yahoo Finance.
"AMD has been able to achieve market share growth, on the one hand, because of its strong execution and significant product innovation results. On the other hand, it obviously also benefited from Intel's difficulties in the past few years - which made it easy for Intel to lose its existing market in the face of aggressive expansion competitors."
However, Intel is not resting on its laurels. The company has finally launched its long-awaited 18A chip technology with its Core Ultra 3 series client CPUs and Xeon 6+ series data center CPUs.
Additionally, both companies are trying to capture market share from Nvidia (NVDA), which currently has an estimated 80% to 90% share of the artificial intelligence (AI) chip market. But AMD is already significantly ahead of Intel in this area: Su Zifeng said that in the next 3 to 5 years, AMD’s artificial intelligence graphics processor (AI GPU) revenue is expected to increase by 60% from US$16 billion in 2025.
In October this year, Intel released its next-generation artificial intelligence data center chip, code-named "Crescent Island." The chip will use the Xe3P microarchitecture and have a memory capacity of up to 160GB, the company said.
"Intel is currently in a recovery phase with a clear focus and improving financial situation," Newman said. "But AMD is executing very efficiently and has momentum. The possibility of Intel losing its top spot in CPUs and data center CPUs is real. While Intel still has a chance to turn things around, the risks are already there."