Intel’s lagging fortunes might have been completely different if it had made a single funding.
In 2017 and 2018, the tech firm had the possibility to take a 15% stake in OpenAI for $1 billion, Reuters reported, citing 4 folks with direct data of the discussions. On prime of that, Intel might have purchased one other 15% stake if it provided OpenAI its {hardware} at value, in keeping with two of the folks.
OpenAI courted Intel as an investor as a result of it might’ve lowered the startup’s reliance on Nvidia, whose chips are actually a mainstay within the AI sector.
However Intel handed on the deal, partly based mostly on the idea that generative AI fashions wouldn’t achieve traction within the close to future, leaving the corporate unable to recoup its funding, in keeping with three of the sources interviewed by Reuters.
A spokesperson for Intel declined to remark to Fortune.
Since then, Intel has struggled to realize a foothold within the red-hot AI sector and its inventory has plummeted, shedding 58% of its worth simply this yr. In the meantime, OpenAI leads the market after releasing its well-liked AI chatbot, ChatGPT, in 2022. After experiencing its worst inventory decline in 50 years final week, Intel’s $84 billion market cap is nearly equal to OpenAI’s most up-to-date valuation of $80 billion.
Though Intel was one of many world’s most essential chipmakers 20 years in the past, the corporate has didn’t adequately benefit from the AI mania that has made rival Nvidia one of many most respected corporations on the planet.
For years, Intel centered its sources on enabling CPUs, like people who energy laptops and desktops, for dealing with AI processes, as a substitute of prioritizing GPUs, graphic chips utilized in gaming, that are more practical at dealing with the myriad calculations required by AI, Reuters reported. Rivals like Nvidia and Superior Micro Units (AMD), against this, succeeded by working with GPUs, whereas Intel largely missed the boat. Within the third quarter, Intel will launch its Gaudi 3 AI chip, which CEO Pat Gelsinger mentioned will be capable to outcompete Nvidia’s H100 GPUs.
Intel’s earnings final week fell far wanting analyst expectations, resulting in a 26% single-day sell-off that pushed its market cap beneath $100 billion for the primary time in 30 years. Gelsinger advised staff final week that the corporate will reduce 15% of its workforce, or about 15,000 jobs, in a serious cost-cutting effort.
“Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate,” Gelsinger wrote within the memo.
Intel passing on the OpenAI funding mirrors different missed alternatives by big corporations that didn’t see the longer term clearly. In 2000, Blockbuster famously turned down a proposal to purchase a fledgling Netflix for $50 million. The streaming firm is value upwards of $250 billion right this moment. In the course of the tech increase of the late ‘90s, Yahoo turned down the possibility to purchase Google for $1 million.
CEO Day by day gives key context for the information leaders have to know from the world over of enterprise. Each weekday morning, greater than 125,000 readers belief CEO Day by day for insights about–and from inside–the C-suite. Subscribe Now.
