Intel's CEO Highlights Growth Potential of AI in Server Market
2023-08-01
The call meeting focused on discussing operational improvements, fiscal discipline, and the progress made by the company. The CEO expressed gratitude towards the team for a successful quarter and invited investors to an upcoming Innovation event in September.
The most important topic discussed in the meeting was the operational improvements, fiscal discipline, cost-saving discipline, and progress made in execution, process execution, product execution, and the ongoing transformational journey of the company.
The CEO, Pat Gelsinger, highlighted the growth potential of AI in the server market. He believes that AI can significantly expand the Total Addressable Market (TAM) for servers, driving new units and increasing demand. The company sees AI as a lucrative opportunity for growth.
Gelsinger provided examples of how AI is being integrated into various applications, such as the DGX platform, which includes CPUs for data processing and preparation. This indicates that the company is actively developing AI platforms to cater to the growing demand for AI workloads.
The CEO also mentioned the broad usage of AI models for inferencing after training, which can drive significant workload across different applications. This highlights the versatility of AI and its potential to be applied in various industries and sectors.
An interesting aspect discussed in the meeting was the emergence of AI in low-power devices, such as hearing aids. Gelsinger mentioned that AI capabilities are being integrated into devices with power consumption as low as 10 microwatts. This indicates that the company is exploring opportunities to bring AI to a wider range of products and markets.
Overall, the CEO's optimism about the long-term opportunities for the company in the data center market, driven by the increasing adoption of AI, suggests that the company is positioning itself to capitalize on the growth potential of AI in the server market.
The company's market outlook is positive, with operational improvements, fiscal discipline, and cost-saving measures implemented. They have also made progress in execution, both in terms of processes and products. The company is focused on innovation and actively engaging with investors. The tone of the message indicates optimism and a positive outlook for the company's future.
The key drivers of the business include strategic sales, attractive deals, accelerated demand, custom silicon for AI, foundry customers, advanced packaging strength, opportunities in various sectors, and improvement in working capital.
The company's plans for product/service include strategic sales and attractive deals to accelerate demand, a focus on custom silicon for AI applications, engaging with foundry customers for opportunities in AI accelerator components, exploring variations of Intel standard products for unique AI accelerator designs, leveraging advanced packaging strength to participate in the market, providing product and technology solutions for AI chips in various industries, aiming to become a product provider and a foundry and technology provider in the AI market, and working towards improving working capital and free cash flow by reducing inventory and optimizing accounts receivable.
The competitive landscape in the server industry is evolving. The company mentioned that there may be a decline in the Total Addressable Market (TAM) in the near term due to factors such as data center digestion for cloud providers and weakness in the enterprise sector. They also noted weakness in the China market compared to North America. However, the company remains optimistic about their overall position. They believe that their products are improving, particularly in terms of AI capabilities and their Gen 4 and beyond products. They also highlight the increasing momentum of AI use cases, which are showing best results on CPUs. The company believes that AI will expand the TAM for servers, driving new workloads and applications across various sectors. Despite the near-term challenges, the company sees long-term opportunities in the data center market, especially with their strengthening accelerator roadmap.
The company's outlook for the quarter is positive, with expected revenue between $12.9 billion and $13.9 billion. They anticipate strong growth in their IFS and Mobileye divisions, although the data center, network, and edge markets may face challenges. The company forecasts a gross margin of 43%, a tax rate of 13%, and earnings per share of $0.20 at the midpoint of revenue guidance. They are investing in manufacturing capacity and have secured agreements with governments in Poland and Germany. Overall, the company is confident in its outlook for the quarter.
The company's capital spending plans are guided by their Smart Capital framework. They aim to create flexibility through proactive investment in shells and aligning equipment purchases to customer demand. The company has closed agreements with governments in Poland and Germany, which include significant capital incentives. They are also well positioned to meet the requirements of funding laid out by the U.S. CHIPS Act. The timing of some capital assets is uncertain and could land in either '23 or '24, depending on various factors. However, the company expects net capital intensity in the mid-30s as a percentage of revenue across '23 and '24 in aggregate. They also anticipate receiving capital offsets at the high end of their previous range of 20% to 30%.
In conclusion, the meeting highlighted the positive operational improvements, fiscal discipline, and progress made by the company. The CEO expressed optimism about the long-term opportunities in the data center market, driven by the increasing adoption of AI. The company's market outlook is positive, with a focus on strategic sales, attractive deals, and custom silicon for AI applications. Despite near-term challenges, the company sees long-term opportunities in the server industry. They anticipate strong growth in their IFS and Mobileye divisions and are confident in their outlook for the quarter.