Intel is providing attractive pricing to system providers for its AI chips.
Nvidia (NVDA 1.25%) currently dominates the market for artificial intelligence (AI) accelerators, with a market share that some estimates put above 90%. The company’s AI chips are expensive, but customers have been willing to pay up to participate in the AI revolution.
Intel (INTC -0.86%) will launch the third generation of its Gaudi AI accelerators later this year. The company had a backlog of about $2 billion related to AI chips a few months ago, although it only expects to generate about $500 million in Gaudi 3 sales in 2024. The slow ramp-up may be due to supply constraints.
Nvidia’s head start and the mature software ecosystem around its AI chips will make it tough to beat. Intel is working with other industry players to standardize an alternative to Nvidia’s proprietary CUDA platform, although that effort will take time. The second prong in Intel’s AI strategy is to offer prospective customers significant cost savings compared to Nvidia’s solutions.
Intel has made a slew of AI-related announcements at Computex this week. There were high-profile updates on the company’s upcoming Lunar Lake laptop chips and its new lineup of server CPUs, but the company also filled in some details on the pricing and availability of its Gaudi AI accelerators.
First, Intel is expanding the network of system providers set to offer Gaudi 3 systems. While Intel was already working with Dell, Hewlett Packard Enterprise, Lenovo, and Supermicro, the company is now collaborating with Asus, Foxconn, Gigabyte, Inventec, Quanta, and Wistron as well. These new partnerships should expand the reach of Gaudi 3 systems when they become available this year.
Second, Intel announced attractive pricing for system providers, an unusual move meant to highlight the value proposition of its Gaudi chips. An AI kit featuring eight last-gen Gaudi 2 AI chips and a universal baseboard will cost system providers $65,000, while a version with eight Gaudi 3 AI chips will go for $125,000. Intel estimates that these kits are priced at one-third and two-thirds the cost, respectively, of comparable competitive platforms.
While Intel is undercutting Nvidia on price, the company expects its chips to put up impressive performance numbers. 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 offers up to twice the AI inferencing performance of the H100 running popular open-source models.
Nvidia’s H100 will be succeeded later this year with the company’s Blackwell GPUs, which will provide significant jumps in performance and efficiency. Another thing that will likely jump is the price, so while 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 should have a better handle on supply as it ramps up production of its Gaudi 3 chips. With demand for AI chips still booming, Intel could see a large increase in Gaudi chip sales next year as customers look for cost-effective alternatives to Nvidia’s market-leading products.
While Nvidia will almost certainly continue to dominate the market for AI accelerators, Intel could win significant market share if its aggressive pricing resonates with prospective customers.
