Intel's recent development has potentialy stirred up trouble for AMD.
Intel's semiconductor giant, INTC (6.07%), finds itself in the midst of a challenging period. Without a permanent CEO, a wavering foundry strategy, market share losses, and faltering AI chip efforts, the company is facing an existential crisis. However, it's worth noting that Intel's server CPU business has seen some progress.
A few years ago, AMD leapfrogged Intel with its Genoa family of chips, outperforming Intel in core count, performance, and efficiency. Intel eventually responded with its Granite Rapids server CPUs, bringing its mainline server CPU products onto the advanced Intel 3 process. This shift gave Intel significant performance and efficiency gains, allowing them to up the maximum core count to 128, nearly doubling their predecessor's capacity. Reviews suggested that Intel had managed to close the gap with AMD regarding performance.
A surprising aspect of the Granite Rapids launch was the pricing. Intel decided to set the flagship model's price at the highest level ever for an x86 server CPU, which, given the competitive landscape, could have signaled either extreme confidence in Granite Rapids or an acceptance that the market had shifted since a few years prior. However, this week, Intel drastically reduced the listed prices for its Granite Rapids CPUs without any formal announcement. The flagship model's price now stands at $12,460, a substantial $5,340 decrease from the original launch price. Other models also experienced price cuts, making pricing more competitive with AMD alternatives.
This price cut could signify a few things. First, Granite Rapids may not have sold as well as Intel had anticipated, with the higher pricing potentially deterring customers. Alternatively, Intel could be acting aggressively to recapture market share it has lost to AMD. The price cut may impact profits, but if the high volume sales and improved fabric efficiency offset the marginal loss, profit margins might not take a significant hit.
The price cut allows Intel's Granite Rapids chips to offer a better value proposition compared to AMD's. AMD manufactures its chips externally with TSMC, and if AMD were to respond with price cuts, it would erode its profit margins. Currently, the listed prices for server CPUs serve as a ceiling, and Intel may have provided substantial discounts to large cloud-computing customers before. Regardless, it appears that Intel has taken off the gloves as it works to revitalize its data center business and regain some market share.
[1] Intel slashes Granite Rapids Xeon 6 pricing by up to 30%[2] AMD still dominates the server CPU market, but Intel is fighting back[3] Intel disrupts the server CPU market with significant Granite Rapids pricing cuts [Enrichment Data]
In the current situation, investors might be closely monitoring Intel's finance as they assess the impact of the Granite Rapids pricing cuts on the company's profits and market competitiveness. Considering the reduced prices, potential customers could now consider Intel's server CPUs as more financially attractive options compared to AMD's alternatives.
