Intel is pushing hard to sharpen its edge in the data center and AI markets, even as it navigates a tricky macro environment. Here’s a look at where things stand and where the company is heading.
Data Center: Strong Start, Challenging Q2
Intel surprised many with stronger-than-expected data center growth in Q1 2025, driven largely by a few hyperscaler customers. But the company expects DCAI (Data Center and AI) revenue to decline faster than CCG (Client Computing Group) in Q2. Several factors are behind this: some hyperscaler demand may have been front-loaded, and macroeconomic uncertainties and potential tariffs are adding pressure.
Despite the expected softness in Q2, Intel remains optimistic for the rest of 2025. New products like Granite Rapids and Xeon 6 are set to boost momentum, especially as enterprises look to consolidate and upgrade infrastructure. Xeon 6, in particular, is positioned as the CPU choice for AI head nodes.
Telco sector demand is also showing signs of life. However, Intel faces a balancing act—while demand for older generation parts remains high, supply constraints on Intel 7 are a real challenge.
Intel’s main goals for its data center business are clear: stabilize market share, increase margins, and drive up average selling prices (ASPs). Hyperscaler and enterprise demand remain strong, but Intel acknowledges a tougher fight to hold share internationally.
Networking, Optics, and IPUs: Building the AI Infrastructure Backbone
Intel is betting big on the future of AI cloud infrastructure. It is advancing in critical areas like UCIe (Universal Chiplet Interconnect Express) and other building blocks. Success with its Infrastructure Processing Unit (IPU) products is another bright spot, with IPU revenue expected to double from 2024 to 2025.
Optics is emerging as a crucial piece of Intel’s rack-scale architecture vision. Notably, Intel remains the only foundry offering an optics-based manufacturing option. Combined with the Open x86 ecosystem, this strengthens Intel’s pitch to customers building next-gen AI infrastructure. The company has already scored one major custom design win in this area and anticipates more.
AI Strategy: A Full-Stack Play for the Future
Under the leadership of CEO Lip-Bu Tan, Intel is refining its AI strategy, with a sharp focus on emerging trends like reasoning models, agentic AI, and physical AI. Lip-Bu’s track record of funding and incubating AI startups is shaping Intel’s approach to building full-stack AI solutions designed for accuracy, power efficiency, and security.
Intel aims to be the compute platform of choice for AI, seeking partnerships with industry leaders to create purpose-built silicon and software. Edge computing and inference are also key priorities, with Intel exploring new architectures tailored for low-power, high-efficiency performance.
On the data center AI front, the strategy is under review. Products like Gaudi and Falcon Shores are still part of the portfolio, but Intel’s leadership, including Michelle Johnston Holthaus, acknowledges the need for a stronger, more competitive lineup. Updates on Intel’s AI roadmap are expected over the coming months.
Executing on a Holistic Vision
Intel’s broader AI strategy revolves around adapting its product portfolio to meet new and emerging AI workloads. Execution and on-time delivery are non-negotiables. Customer feedback is driving many of these changes, ensuring Intel’s designs are closely aligned with real-world needs.
In 2025 and beyond, Intel is working to solidify its leadership by executing its product roadmap (Granite Rapids, Panther Lake with Intel 18A), deepening foundry customer trust, and capitalizing on the growing demand for AI infrastructure.
The bottom line: Intel isn’t just playing defense. It’s making bold moves to secure its place at the center of the next era of computing.