Intel has canceled the release of its AI accelerator code-named Falcon Shores, instead focusing on the next-generation chip that the company believed would be more competitive in the data center market.
Intel will direct its development efforts to Jaguar Shores, a GPU designed for AI inference and high-performance computing, Intel interim co-CEO Michelle Johnston Holthaus said during the company's earnings call with Wall Street analysts on Thursday. The company could manufacture Jaguar Shores using its advanced 18A manufacturing process.
Intel is banking on Jaguar Shores to fiercely compete against Nvidia and AMD in the AI market, which Intel has yet to penetrate successfully. Its first AI data center chip, Gaudi, delivered disappointing sales and its successor, Falcon Shores, wasn't the product enterprises wanted, Holthaus said.
"One of the things we learned from Gaudi is it's not enough to just deliver silicon," Holthaus said. "We need to be able to deliver a complete rack-scale solution."
Holthaus did not say when Intel would release Jaguar Shores, which analysts didn't expect until after 2025. Intel initially planned to design Falcon Shores as a hybrid CPU-GPU before changing the design to a GPU-only product. The chip was not rack-scale technology.
"It seems drastic to cancel an AI accelerator product family, but they can ill afford a bad product in a rapidly growing market against a dominant player like Nvidia or a competitor gaining traction like AMD," said Alvin Nguyen, an analyst at Forrester Research.
It seems drastic to cancel an AI accelerator product family, but they can ill afford a bad product in a rapidly growing market.
Alvin NguyenAnalyst, Forrester Research
Intel's ability to regain revenue growth hinges on reversing its losses against Nvidia and long-time rival AMD. Nvidia has dominated the hyperscale data center market with the most advanced AI accelerators, while AMD has made gains in traditional data centers and PCs.
"We have to stem the tide of share loss in the data center, and so we will be fighting for every socket in that business," Holthaus said.
Intel's current Xeon processor for traditional data centers has narrowed the sales growth gap with AMD, Holthaus said. She expected Diamond Rapids, the next-generation Xeon anticipated by early 2026, to continue this trend.
Intel reports revenue drop
The company reported revenue of $14.3 billion for the quarter ending in December, marking a 7% decrease year over year. Intel surpassed Wall Street analysts' expectations for the quarter but provided a revenue forecast below expectations for the current quarter. Intel projected revenue between $11.7 billion and $12.7 billion for the period ending in March.
Nevertheless, Intel's latest quarterly earnings report, which included a 3-cent loss per share, seemed to satisfy investors. Its stock rose more than 3% in after-hours trading.
"Q4 was a solid quarter to close out a challenging year," interim co-CEO David Zinsner told analysts during the joint call with Holthaus. Intel ended 2024 reporting its third consecutive year of revenue decline and a share price that fell more than 50%.
The Intel board appointed Holthaus and Zinsner temporary roles after forcing CEO Pat Gelsinger to retire in December. The executives did not provide details on the search for a permanent CEO.
Intel's financial struggles stemmed from being ill-prepared for the market shift toward chips that run AI models in large, hyperscale data centers. Last August, the company slashed 15,000 jobs, or 15% of its workforce, and set a goal of cutting capital expenditures by $10 billion this year.
Intel's foundry business, now an independent subsidiary called Intel Foundry, has been a significant money drain. Intel has opened its manufacturing operation to third-party chip designers, including competitors. However, Intel executives acknowledge that it will take time to build a customer base.
In the meantime, the Foundry expects to break even in 2027, primarily by manufacturing Intel chips. Holthaus, in charge of all Intel products, has committed to using the Foundry's advanced 18A process to manufacture Panther Lake, the company's next-generation mobile processor. Intel expects to release Panther Lake in the second half of the year.
Holthaus has not committed to using the Foundry to make Panther Lake's successor, Nova Lake, which is set for release in 2026.
Intel contracts with Taiwan Semiconductor Manufacturing Co. for some of its products. TSMC is the world's largest chip manufacturer, accounting for more than 60% of the market.
Antone Gonsalves is an editor at large for Informa TechTarget, reporting on industry trends critical to enterprise tech buyers. He has worked in tech journalism for 25 years and is based in San Francisco. Have a news tip? Please drop him an email.
