Proactive Investors - Intel Corporation (NASDAQ:INTC) revealed its plans to spin out its Programmable Services Division, which could help the company tap into a multibillion-dollar market opportunity.
Starting January 1, 2024, Intel plans to operate its Programmable Solutions Group (PSG) as a stand-alone business but will pursue an initial public offering (IPO) over the next two to three years.
Intel is eyeing the Field-Programmable Gate Array, or FPGA market, which designs integrated circuits that can be configured or programmed by the user after manufacturing to perform specific digital tasks.
It’s a market that is expected to grow at over a 9% compound annual growth rate from $8 billion in 2023 to $11.5 billion by 2027, according to third-party data.
In 2018, the potential of FPGA-based cloud services generated significant anticipation within the tech industry. However, these expectations fell short, primarily due to a lacking software ecosystem that was needed to fully exploit FPGA capabilities.
Microsoft Corporation (NASDAQ:NASDAQ:MSFT), though, took the lead in utilizing Altera FPGAs, initially employing them for acceleration and later tapping into their ultra-low latency capabilities as smartNiCs (smart Network Interface Cards). Despite these efforts, NVIDIA Corporation (NASDAQ:NASDAQ:NVDA)'s GPUs emerged as dominant players, benefiting greatly from Nvidia's robust Cuda ecosystem—a vision that Nvidia's CEO, Jensen Huang, had as early as 2003.
While FPGA-based cloud services didn't materialize as expected, FPGAs continue to hold a pivotal role in various high-performance computing applications. They find applications in advanced ASIC (Application-Specific Integrated Circuit) designs, including emulation, and play a crucial role in autonomous driving technology. FPGAs are also instrumental in acceleration and inferencing tasks. Moreover, they are key components in basestations, contributing to baseband and radioheads, demonstrating their enduring importance in the tech landscape.
For Intel, running PSG as a stand-alone business with future plans for an IPO will unlock the value of a business with secular growth opportunities, analysts at Baird wrote, with expanded focus on key FPGA end markets beyond data centers and boost accountability and the ability to attract talented engineers and executives.
Baird sees potential for an AI premium in the valuation in two or three years.
“Developing software development platforms will be key to increase adoption of FPGAs in data centers, in our view,” analysts wrote.
Intel shares closed around 0.7% higher on Wednesday at US$35.93.