Intel's AI Business Is All Hype — Here's the Real Reason for Optimism in 2024

At the end of 2023, Intel (INTC -1.75%) hosted its “AI Everywhere” event, showing off new chip systems designed to take on the best of what Nvidia has to offer for data centers. Intel also showed off some new mobile chips for on-device AI too, gearing up for a battle with new laptop chips coming to market from the likes of Qualcomm.

But then Intel released Q4 2023 earnings, adding further fuel to the claim that AI is merely hype — at least at this point — for the old storied chipmaker. Intel’s Data Center and AI (DCAI) business fell another 10% year-over-year in Q4 to $4 billion, and ended down 20% for full-year 2023 to $15.5 billion.

This isn’t a new trend, either. Intel has actually been ceding data center market share to CPU rival AMD for years, and both Intel and AMD are arriving late to the data center accelerated computing party that Nvidia kicked off via its GPU last year.

Nevertheless, that doesn’t mean there’s no reason for optimism in Intel for 2024. On the contrary, a far healthier PC and laptop business (Intel’s Client Computing Group, or CCG) is showing signs of life again. Here’s what investors need to know.

Intel’s real moneymaker is heating up

Intel reported an 8% decline in CCG for full-year 2023, which is notable given this is far and away the company’s largest segment.

Intel Segment

2023 Sales

% Increase (Decrease) Over 2022

Client Computing Group (CCG)

$29.3 billion


Data Center and AI (DCAI)

$15.5 billion


Network and Edge (NEX)

$5.8 billion



$2.1 billion


Intel Foundry Services (IFS)

$952 million


Data source: Intel.

But to close out 2023, CCG actually reported a very healthy 33% increase in fourth-quarter sales compared to the year prior. You see, after a nasty overhang of supply for PC and laptop chips that began in late 2022 (a symptom of pandemic-era consumer electronics spending abruptly coming to an end), Intel and the broader PC market have successfully worked down excessive chip inventory. That’s paving the way for a return to growth in 2024.

After all, eventually all of those computers purchased during the pandemic will need replacing. PCs and laptops aren’t exactly expected to be a high-growth market overall in the coming decade, but they’ll still have their years of cyclical expansion. 2024 is shaping up to be one of those years as Intel laps depressed CCG sales from 2023.

As for DCAI, CEO Pat Gelsinger did indicate an expected bottom for that unit in the first quarter of 2024 before it starts to rebuild again. However, at this point, it’s CCG that will carry the day — especially considering that DCAI generated a meager operating profit of just 2% in Q4 2023.

Intel really needs that CCG cash

By contrast, and more importantly for giant Intel, is what is happening to CCG as its sales start to recover. In addition to the 33% year-over-year sales rebound in the final months of 2023, operating profit margin went from just 8% a year ago to a very healthy 33% in Q4.

Intel is really going to need that CCG cash flow in the coming years, as it has big aspirations to offer its vast global manufacturing footprint to third-party chip designers via its Intel Foundry Services (IFS) business unit.

Intel historically only manufactured its own chips, but the market has pivoted over the last decade as semiconductor design and manufacturing have each gotten exponentially more complex. Billions of dollars will be spent with key manufacturing equipment providers like ASML Holding in the coming years to make IFS a viable option for third-party chip designers.

In the meantime, Intel stock’s sell-off after the Q4 2023 earnings update looks completely warranted. Rallying PC sales will continue to be offset a bit by the AI fluff, as well as flagging sales in other parts of the semiconductor market. Intel trades for about 45 and 26 times Wall Street analysts’ consensus estimates for 2024 and 2025 earnings per share, respectively. For me, there are easier semiconductor stocks to invest in right now, but I understand why there’s growing optimism surrounding Intel. Just don’t call it AI.

Nicholas Rossolillo and his clients have positions in ASML, Advanced Micro Devices, Nvidia, and Qualcomm. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Nvidia, and Qualcomm. The Motley Fool recommends Intel and Mobileye Global and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

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