Intel’s Graphics Card Business Is Struggling, But That Could Change Soon

Intel's first generation of graphics cards was plagued by software issues. Round two could be different. Read More...

Intel’s first generation of graphics cards was plagued by software issues. Round two could be different.

Intel (INTC 0.55%) entered the discrete graphics card market in late 2022 with a lineup of low-end and mid-range Arc graphics cards. While the hardware was capable, software issues plagued the launch and persisted for months. The company took shortcuts with its software drivers, which act as the bridge between the hardware and the operating system, leading to bugs and poor performance in some games.

Intel has made substantial progress fixing the software issues, releasing a steady stream of updates that have vastly improved performance across problematic games. However, the early software mistakes likely turned gamers away. While Intel’s graphics cards are highly competitive at their price points, sales have been sluggish.

In Jon Peddie Research’s latest update on the graphics card market, Intel’s market share fell to 0% in the first quarter of 2024, down from 4% in the prior-year period. That compared to a 12% share for AMD and an 88% share for market leader Nvidia.

Battlemage could be a winner

One reason sales of Intel’s graphics cards have slowed down is likely the impending launch of the company’s next-generation products. Codenamed Battlemage, Intel’s upcoming graphics cards will launch without the software baggage that dragged down the company’s inaugural effort.

Intel hasn’t disclosed much about Battlemage so far, but the company’s unveiling of its Lunar Lake laptop chips provides a glimpse of the possibilities.

Lunar Lake features an integrated graphics chip built on the Xe2 architecture. This is the same architecture that will be shared by Battlemage when it launches. Intel hasn’t confirmed a launch date, but later this year or early next year both seem plausible.

The graphics in Lunar Lake offer some major improvements over the last-gen graphics featured in Meteor Lake, resulting in a 50% improvement in performance at the same power level. Given that Lunar Lake is designed first and foremost for power efficiency, the Battlemage discrete graphics cards could see an even larger performance boost.

The problem for Intel last time around wasn’t the hardware, so the combination of more powerful hardware and more stable software should make for a compelling product lineup.

Plenty of competition

Not much is known about launch dates for next-generation graphics cards from AMD or Nvidia. Both companies have been more focused on data center GPUs aimed at AI workloads, which has turned into a much larger market than gaming GPUs.

Rumors put both Nvidia’s and AMD’s next-gen launches in the fourth quarter of 2024, although either could be in 2025. While launch dates are up in the air, Intel, Nvidia, and AMD will likely be launching next-gen graphics cards within a few months of each other. Needless to say, competition will be fierce.

With the software problems mostly behind it, Intel will have a much better shot this time around at snagging meaningful market share. If Battlemage can deliver the big performance gains that Lunar Lake suggests, the company’s second generation of graphics cards could finally break the Nvidia-AMD duopoly.

Timothy Green has positions in Intel. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.

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