Intel to Reportedly Acquire Habana Labs to Gain AI Chip Tech

Intel INTC is reportedly in advanced talks to acquire Habana Labs, a Tel Aviv, Israel-based fabless semiconductor company that specializes in AI chip development.

Per Calcalist, an Israeli daily, “one person familiar with the matter” revealed that the deal is valued for approximately $1-$2 billion.

Following the news, shares of Intel were down 2.8% on Dec 3, eventually closing at $56.07.

Notably, the Zacks Rank #2 (Buy) stock has gained 7.9% post third-quarter earnings release, outperforming the industry’s rally of 5.6%.

Key Insights

Intel is leaving no stone unturned to up its game in the AI trained inference server chip market against NVIDIA NVDA and Xilinx XLNX. Acquisitions of Nervana Systems and Movidius have been aiding the chipmaker in this regard.

In fact, the company has rolled out Nervana Neural Network processors to support deep learning processes. Moreover, Intel unveiled latest Movidius visual processing unit, aimed at accelerating complex computer vision, edge media, and inference applications.

Moreover, the chipmaker’s new 10 nanometer technology based AI processor, Springhill, is being developed at its Haifa facility in Israel.

Additionally, Intel’s ongoing AI investments in Israel-based startups including Habana Labs, NeuroBlade, among others, are worth mentioning. Per Reuters, Intel Capital’s investments on Israel startups came in at approximately $120 million in 2018.

Notably, Habana Labs was founded in 2016, and has raised investments worth $120 million to date, including $75 million in November 2018 round headed by Intel Capital.

Moreover, Habana Labs’ strength in Goya family of AI chips is worth mentioning.

Further, Habana Labs rolled out latest AI training processor, Gaudi, in June this year. It is expected to challenge NVIDIA’s dominance in the AI processor domain on its DGX family of inference chips and innovative AI platforms.

In case the talked-about deal leads to fruition, we believe Intel stands to benefit a great deal as AI techniques like ML, deep learning and natural language processing (NLP) are rapidly changing business dynamics.

Growth Prospects Plenty

Rapid proliferation of AI into hardware system is coming mainstream as secular growth in data calls for effective systems to support processing of workloads. Moreover, increasing investments on development of inference-enabled chips is anticipated to aid Intel boost self-driving initiatives and register new deal wins from Mobileye.

Per latest IDC data, worldwide spending on AI systems is envisioned to be $37.5 billion in 2019. The research firm expects the tally to hit $97.9 billion in 2023, representing a CAGR of 28.4% between 2018 and 2023. This favors Intel’s increasing focus on delivering efficient solutions to intelligently handle workloads and improve performance.

Another Key Pick

Another top-ranked stock in the broader technology sector is Marchex, Inc. MCHX, currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Marchex is currently pegged at 15%.

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