SwedenLivingWorld world_2_fill WorldBusiness BusinessSports sports-soccer SportsEntertainmentEntertain

Why the IT giant is making a billion-loss

The IT giant Intel is facing a painful billion-loss – and is forced to lay off thousands of employees. The main reason for the setback is that the company failed to compete in the AI race. They got a taste of their own medicine, says Magnus Mähring, professor at the Stockholm School of Economics.

» Updated: 04 October 2024, 19:26

» Published: 03 August 2024

Why the IT giant is making a billion-loss
Photo: Ben Margot/AP

On Friday, the news came that Intel, which among other things manufactures microprocessors, is making a loss of 1.6 billion dollars in the second quarter.

Now the IT giant will have to save 10 billion dollars next year and also reduce its workforce by over 15 percent – which corresponds to at least 15,000 employees, according to The Verge.

The red figures have several causes – and a longer history, according to Magnus Mähring. It started already when smartphones came.

There arose a need to build processors for smartphones, with architecture that draws much less power.

But they didn't catch on, which made them miss a market that became big.

Pure luck for Nvidia

The second and main reason is that they haven't kept up with AI development. Intel has specialized in ordinary processors, unlike for example Nvidia which makes graphics processors – and it's that type of processor that's primarily used in AI applications.

But according to Magnus Mähring, it was a coincidence that Nvidia would become leading in AI.

Nvidia was working on a niche product that a few percent of all PC owners bought because they wanted to play games. It was seen rather as a complement to what Intel did.

But then the AI boom came and precisely the type of processors that Nvidia manufactured were superior for AI applications.

Too late to catch up

He means that it was already too late for Intel to catch up. And the dominance they had previously in their area, they won't have in the future, he says.

But that doesn't mean that life is over. It's the same as for IBM, which also lost its dominant position, but it's still a well-run and profitable company.

The technology company IBM was dominant when it came to large and medium-sized computers for a very long time. But in the PC boom, there were many companies that no longer needed their products, since Intel-based personal computers instead took over many applications.

Then the demand for IBM's mainframes fell and their entire business model had to be re-evaluated.

So it's roughly the same thing that's happening now between Intel and Nvidia?

Yes exactly. One can say that Intel got a taste of its own medicine.

Tags
TTT
By TTThis article has been altered and translated by Sweden Herald

More news

Took a tough stance on crypto companies - resigns
1 MIN READ

Took a tough stance on crypto companies - resigns

Ingvar Carlsson on PG: "A very loyal friend"
2 MIN READ

Ingvar Carlsson on PG: "A very loyal friend"

No Wage Guarantee in American Process
1 MIN READ

No Wage Guarantee in American Process

He became "PG" to the entire Swedish people
3 MIN READ

He became "PG" to the entire Swedish people

PG Gyllenhammar has died: "meant a lot"
1 MIN READ

PG Gyllenhammar has died: "meant a lot"

Unstable US stock market ends on a plus
1 MIN READ

Unstable US stock market ends on a plus

Temu's owner shows its hand
1 MIN READ

Temu's owner shows its hand

Nvidia rises in pre-trading on Wall Street
1 MIN READ

Nvidia rises in pre-trading on Wall Street

Reconstruction in the USA to save Northvolt
3 MIN READ

Reconstruction in the USA to save Northvolt

Northvolt: Negotiations are still ongoing
3 MIN READ

Northvolt: Negotiations are still ongoing

Higher Compensation for Job Interviews in Another Location
1 MIN READ

Higher Compensation for Job Interviews in Another Location

Vehicle Giant Warns of Challenges in 2025
1 MIN READ

Vehicle Giant Warns of Challenges in 2025

Unchanged interest rate in Turkey
1 MIN READ

Unchanged interest rate in Turkey

Trump anxiety in the EU over US tariffs
3 MIN READ

Trump anxiety in the EU over US tariffs

Weak demand for scrapping premium
1 MIN READ

Weak demand for scrapping premium

E-fuel company takes in half a billion
1 MIN READ

E-fuel company takes in half a billion

New Report Boost for AI Giant Nvidia's Share
2 MIN READ

New Report Boost for AI Giant Nvidia's Share

Stockholm Stock Exchange Turned Upwards
1 MIN READ

Stockholm Stock Exchange Turned Upwards

Bitcoin closer to the dream limit
1 MIN READ

Bitcoin closer to the dream limit

Higher fee to stop burning of plastic
2 MIN READ

Higher fee to stop burning of plastic