Intel is at risk of losing its long-standing chip lead to AMD

Intel (INTC) is in the middle of a massive turnaround effort meant to restore the fallen chipmaker to its former glory. And while the company has begun to show early signs of life, beating expectations for its latest earnings on the strength of its data center products, it’s not quite on solid footing yet.

In the meantime, longtime rival AMD (AMD) is gaining ground on Intel, pulling market share from the one-time global chip leader in both the data center and PC markets.

During AMD’s Financial Analyst Day in New York on Tuesday, CEO Lisa Su said she anticipates her company will capture upwards of 50% of CPU server revenue market share over the next three to five years on the back of its Epyc chips. That would be up from the 40% revenue market share the company currently holds.

Su also said she expects to see 10% revenue growth across AMD’s client business, which includes gaming and PC chip sales. All totaled, the company looks to grab more than 40% of client revenue market share, up from 28% today.

According to Mercury Research, that would drop Intel’s share of the client market from roughly 72% to about 60%, a steep decline for the company. Intel and AMD are the only companies that build what are called x86 chips, or chips that use the x86 processing architecture. They differ from chips based on, say, Arm’s chip architecture or Nvidia’s architecture.

In a note to investors, Bernstein analyst Stacy Rasgon called the projections “somewhat aggressive/aspirational, but also not necessarily outside the realm of possibility if one wants to dream.”

Of course, there’s no guarantee that Su’s prognostications will come true. Companies frequently offer near- to long-term projections that they either miss or surpass, but the risk to Intel is real.

“AMD has executed incredibly well in its [data center] CPU space with [Epyc], winning volume from the large hyperscalers and increasingly taking share in the enterprise,” Daniel Newman, CEO of The Futurum Group, told Yahoo Finance.

“This market share growth has come from a perfect storm of strong execution from AMD and meaningful product innovation and, of course, Intel’s woes that have lasted several years, making it vulnerable to market taking from an aggressive competitor.”

Intel isn’t resting on its laurels, though. The company has finally begun to release its long-awaited 18A chip technology via its Core Ultra series 3 client CPU and Xeon 6+ data center CPU.

Both companies are also working to take market share from Nvidia (NVDA), which is estimated to control upward of 80% to 90% of the market in the AI space. But AMD is already well ahead of Intel, with Su saying she anticipates a 60% increase in AI GPU revenue over the next three to five years versus the $16 billion it will see in 2025.