Missed opportunity: how Intel missed the chance to invest in OpenAI

In the days when Intel ruled the world of computer chips, its position was unshakable. But in the era of artificial intelligence, the tech giant has found itself in trouble. History might have been different had Intel decided to invest in OpenAI, a then-young non-profit organisation working on generative artificial intelligence.

Seven years ago, in 2017 and 2018, Intel $INTChad an option to buy a stake in OpenAI for $1 billion, which would have given it a 15% stake. Another option was to acquire a 15% stake in exchange for producing hardware for OpenAI at cost prices. Negotiations went on for several months, but ultimately no deal was reached. According to three anonymous sources, because of then-CEO Bob Swan's skepticism about the imminent arrival of commercially viable generative AI models, as well as Intel's data center's reluctance to produce products at cost.

OpenAI was interested in Intel's investment because it would reduce their dependence on Nvidia's chips and allow them to build their own infrastructure.

The reluctance to invest proved to be a major mistake. Indeed, OpenAI has since transformed and its technology, including its revolutionary ChatGPT model, is now making a big impact on the AI market and the company's value is now estimated at around $80 billion. Intel, which once dominated the chip market, has failed to achieve similar success in AI.

In recent weeks, Intel's stock value has fallen by more than a quarter in its worst trading day since 1974. For the first time in 30 years, the tech company is worth less than $100 billion. Despite efforts to create a groundbreaking AI chip, Intel still faces competition, with rivals such as Nvidia, with a $2.6 trillion value, and AMD, with a $218 billion value, leading the way in this fast-growing field.

Intel has been trying to adapt, for example with the launch of the third-generation Gaudi chip and the planning of the Falcon Shores chip, but so far these moves don't seem to have helped reverse the negative trend. Microsoft has leveraged its investment in AI to get to the top of the market, which only underscores Intel's missed opportunity.

This case highlights the key strategic mistakes Intel made and the importance of good timing and strategic thinking in a rapidly evolving technology environment.

Source: Yahoo Finance, CNN.

Disclaimer: You will find a lot of inspiration on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.