Silicon Wars: Inside the battle for market share in the chip space

Yahoo Finance’s Daniel Howley joins the Live show to discuss the battle for market share in the chip space amid declining chip demand.

Video Transcript

- Samsung's profits are down. A key driver of the loss is its memory division. Though it has traditionally been a profit driver, division saw weakness as memory chip prices fell amid dwindling demand. Well, this comes amid intensifying competition in the chip space as Intel partners with arm to operate to optimize production. Intel is set to report results after the bell.

The street currently expecting a 15% share loss. Let's get to Yahoo Finances Tech Editor Dan Howley for more on this battle for market share. Dan, what are you watching?

DAN HOWLEY: Yeah, so let's start with Samsung and what's going on there. And essentially, why they're seeing these issues with memory is because prices are dropping. Demand is dropping. And that's because manufacturers of devices that use memory chips basically stockpiled them during the pandemic or post-pandemic is they seen demand increase.

And that stockpile now is not being used because people are cutting back on buying. And that includes consumers, as well as commercial buyers. So that's where the memory issues are coming from. Samsung then has little reason or little ability to sell them at price. So they're having to either cut price or, as they said in their announcement, scale back on production until they start to see inventory levels start to even out.

Now, on Intel's side of things, they're going to report after the bell today. And we are expecting another decline there from the company. Revenue expectations are for $11.1 billion. That would be down from $18.4 billion-- excuse me-- in Q1 of 2022. We're expecting an adjusted loss per share of $0.15. That's down from an adjusted increase of $0.87 a share.

The big deals here are the client computing and data center and AI divisions. Client computing, that's basically where the chips were made that go into things like PCs. That is expected to come in at $49 billion compared to 9.-- sorry-- 4.9 billion-- excuse me-- versus 9.3 billion in Q1 2022. And then on the data center side of things, it's expected to be $3.5 billion versus $6 billion in 2022.

So I think the broader question here is we're all talking about AI NVIDIA. I mean, share prices for them are absolutely through the roof. They've rocketed since January 84%. And so why aren't we seeing the same thing out of Intel? Well, because Intel's exposure to AI isn't nearly as large as NVIDIA. NVIDIA basically hit a gold mine here.

They have graphics chips. Graphics chips are great at processing multiple streams of data. And so they're perfect for AI capabilities. That's whether putting together the types of algorithms that are used in AI or putting them into use. So they are great for that. That's why we're seeing companies go and buy up tons of Intel, as well as AMD.

Don't forget, they have their graphics line of products. And they're able to do the exact same thing. Intel, they make CPUs mostly. And so CPUs, they're just not built right for AI computation. And so, as a result, we're seeing fewer companies look towards Intel for AI. In fact, if you look at what we had seen from reports about Meta from a Reuters report, they had said that Meta was struggling with their AI side because they were using CPUs rather than GPUs.

Now, whether or not they were using Intel or NVIDIA's, besides the point, that's just to illustrate that CPUs are not built for this kind of function. So now that we're seeing more people pile into that, I don't think that we're going to get the kind of boost out of Intel that we may from NVIDIA or AMD because of that wave of AI.

- We'll certainly be checking in on that when we get the notes after the call to sort of dive into that. I'm sure people will have questions about that AI exposure. A big thank you there to Yahoo Finance's Tech Editor Dan Howley, Thanks so much.