Intel Cancels Falcon Shores AI Chip, Shifts Focus to Jaguar Shores for AI Data Centers

Intel is pulling the plug on Falcon Shores, its next-gen GPU designed for high-performance computing and AI workloads, marking a significant shift in strategy for the company. This decision comes as Intel aims to recalibrate after a series of disappointing product releases and major financial setbacks, all while competitors like AMD and Nvidia continue to make significant headway.

The Change in Focus

During Intel's fourth-quarter earnings call, co-CEO Michelle Johnston Holthaus announced that the company would be using Falcon Shores as an internal test chip, effectively scrapping any plans to release it commercially.

“AI data centers are an attractive market for us,” Holthaus explained, “but we’re not happy with where we are today. We’re not yet making a meaningful impact in the cloud-based AI data center market.”

As a result, Intel plans to simplify its roadmap, concentrating its resources on Jaguar Shores, a new initiative Holthaus sees as a more strategic move. “Jaguar Shores is our opportunity to develop a system-level solution at rack scale,” she said, aiming to address the AI data center market more comprehensively.

A Shift in Approach

Holthaus had already tempered expectations for Falcon Shores last month, describing it as a step-up from Intel’s previous AI chip, Gaudi 3. “One of the things we learned from Gaudi is that just delivering the silicon isn’t enough,” she noted. “Falcon Shores will assist in working on the system, networking, and memory components, but what customers truly want is a full-scale rack solution. That’s where Jaguar Shores comes in.”

Gaudi 3, Intel’s previous AI chip, has been seen as a failure, with the company recently admitting it wouldn’t meet its goal of $500 million in sales due to software-related issues. As of now, only IBM and a few other service providers are using the chip.

An Uphill Battle

Intel needs to overcome intense competition to succeed within the AI chip sector. The AI chip sales for AMD are forecast to reach approximately $7 billion in 2025 yet Nvidia maintains its market leadership with potential revenue of $195 billion for fiscal 2026 based on industry forecasts.

The main focus of Holthaus remains dedicated to resolving AI challenges because she concentrates on cost reduction and compute efficiency. Holthaus stated that standardization would not deliver successful results and pointed out how Intel uses its core assets to provide customers with total cost of ownership solutions throughout the AI spectrum.