How Intel got left behind in the AI chip boom

In 2005, there was no inkling of the artificial intelligence (AI) boom that would come years later. But directors at Intel, whose chips served as electronic brains in most computers, faced a decision that might have altered how that transformative technology evolved.

Mr Paul Otellini, Intel's chief executive at the time, presented the board with a startling idea: buy Nvidia, a Silicon Valley upstart known for chips used for computer graphics. The price tag: as much as US$20 billion (S$26.4 billion).

Some Intel executives believed that the underlying design of graphics chips could eventually take on important new jobs in data centers, an approach that would eventually dominate AI systems.

But the board resisted, according to two people familiar with the boardroom discussion who spoke only on the condition of anonymity because the meeting was confidential. Intel had a poor record of absorbing companies. And the deal would have been by far Intel's most expensive acquisition.

Confronting skepticism from the board, Mr Otellini, who died in 2017, backed away and his proposal went no further. In hindsight, one person who attended the meeting said, it was "a fateful moment".

Today, Nvidia is the unrivaled AI chip king and one of the most valuable corporations in the world, while Intel, once the semiconductor superpower, is reeling and getting no lift from the AI gold rush.

Nvidia's stock market value, for years a fraction of Intel's, is now more than US$3 trillion, roughly 30 times that of the struggling Silicon Valley icon, which has fallen below US$100 billion.

As the company's valuation has sunk, some big tech companies and investment bankers have been considering what was once unthinkable: that Intel could be a potential acquisition target.

Such scenarios add to the pressures facing Mr Patrick Gelsinger, appointed in 2021 as Intel's CEO. He has focused on restoring the company's one-time lead in chip manufacturing technology, but long-time company watchers say Intel badly needs popular products - such as AI chips - to bolster revenue that declined by more than 30 per cent from 2021 through 2023.