Intel's AI PC Chips Face Slow Adoption as Demand for Older Models Surges

Intel's AI PC chips aren't selling; instead, last-gen Raptor Lake booms and creates a shortage

Times are tough for Intel, and it turns out its new heavily-promoted AI PC chips aren't selling as well as expected, thus creating a shortage of capacity for its older chips. The news comes as the CEO announced looming layoffs and a poor financial report sent the company's stock tumbling. Intel says its customers are buying less expensive previous-generation Raptor Lake chips instead of the new, and significantly more expensive, AI PC models like the Meteor and Lunar Lake chips for laptops. During the earnings call, Intel announced that it currently faces a shortage of production capacity for its 'Intel 7' process node, and the company expects this shortage to "persist for the foreseeable future." That's an unexpected shortage to have, as Intel's current-gen chips use newer process nodes from TSMC instead of Intel's older 'Intel 7' node. Intel explained that the shortage of its 7nm production capacity is due to an unexpected surge in demand for its "N-1 and N-2" products, a reference to its two prior-generation chip families. "What we're really seeing is much greater demand from our customers for n-1 and n-2 products so that they can continue to deliver system price points that consumers are really demanding," explained Intel's Michelle Johnston Holthaus. "As we've all talked about, the macroeconomic concerns and tariffs have everybody kind of hedging their bets and what they need to have from an inventory perspective. And Raptor Lake is a great part. Meteor Lake and Lunar Lake are great as well, but come with a much higher cost structure, not only for us, but at the system ASP price points for our OEMs as well." Hothaus also pointed to customers "hedging their bets" in the face of looming tariffs and opting for less expensive models. Bernstein Research's Stacy Rasgon pressed Holtahaus about the implications for the company's upcoming Panther Lake chips, which are set to launch at the end of the year, especially given that the looming tariff disruptions have not yet occurred. Holthaus said the Panther Lake launch remains on track and the company expects continued success in the commercial market, which she said typically precedes broader consumer adoption. The company also continues its expansive work to promote and cultivate a growing developer ecosystem to unleash the power of its AI wares. However, the fact is that AI still doesn't seem to have the 'killer app' that would send waves of customers to stores to purchase an expensive new laptop. Instead, most of the new features revolve around in-built features in existing applications, like chat and productivity software, that are more nuanced and not quite flashy enough to foment a wave of adoption. Naturally, Intel's take on the state of the AI PC revolves around its own products, which have obviously been lackluster, so we're especially interested to hear AMD's take on the matter when it reveals its results in ten days. We'll also have in-depth reporting on CPU market statistics shortly thereafter to track the impact of potential share losses for Intel. Stay tuned.

Intel admits what we all knew: no one is buying AI PCs

Summary Despite Lunar Lake, Intel is seeing stronger demand for older Raptor Lake systems. The Intel 7 node is seeing production shortages due to increased demand. AI PCs powered by Meteor Lake and Lunar Lake are more expensive, leading buyers to Raptor Lake, according to Intel. Intel has tried to position itself at the forefront of the AI PC revolution, but based on the company's latest financial report, it looks like that revolution isn't happening yet. Despite offering dozens of AI-enabled PCs packing a Meteor Lake, Lunar Lake, or even more recently, Arrow Lake, CPU, Intel says that its older generations are seeing "much greater demand," as reported by Tom's Hardware. Related Intel is about to offer a free 7% gaming boost to its latest CPUs Missing Arrow Lake performance finally surfaces. Posts Raptor Lake continues to be a barn burner The AI PC trend hasn't caught on for Intel, however Close "What we're really seeing is much greater demand from our customers for n-1 and n-2 products so that they can continue to deliver system price points that consumers are really demanding," said Intel's Michelle Johnston Holthaus. The response is in reference to a shortage of production capacity on the Intel 7 node, which was introduced with Alder Lake (12th-gen) CPUs and served as the foundation of Raptor Lake (13th-gen) CPUs, as well. The reference to n-1 and n-2 is Holthaus talking about previous generations, and Tom's Hardware reports that the increased demand for Raptor Lake chips is occurring across both the consumer and data center markets. It makes sense that adoption isn't picking up. Although cutting-edge Lunar Lake laptops like the Lenovo Yoga Slim 9i are excellent, they're also expensive. According to Holthaus, the extra cost of a Meteor Lake or Lunar Lake laptop doesn't make sense for a lot of people. "Meteor Lake and Lunar Lake are great, but come with a much higher cost structure, not only for us, but at the system ASP price points for our OEMs as well." The trend mainly concerns laptops, where Intel not only has direct sales through OEMs, but also large orders placed by businesses interested in refreshing a fleet of units. On the desktop front, it's hard to say where Intel stands. However, there's a good chance older generations are still seeing stronger sales. Recent Arrow Lake CPUs like the Core Ultra 9 285K and Core Ultra 7 265K offer great efficiency, but they are sometimes even slower than 13th-gen and 14th-gen CPUs when it comes to gaming. Intel has been in somewhat of a free fall financially for the past year. The company's former ousted CEO Pat Gelsinger has been replaced by Lip-Bu Tan, a successful venture capitalist who previously served on Intel's board. In the only public keynote since taking the reins, Tan made it clear that Intel needs to turn things around, saying "you deserve better" to customers.

Tariff fears push buyers away from Intel's new AI PC chips and toward older processors

In a nutshell: Intel is discovering what most of us already knew: people aren't willing to pay more for CPUs just because they have added AI abilities. Team Blue said sales of its cheaper previous-generation Raptor Lake processors are seeing high demand, a contrast to the Lunar Lake and Meteor Lake chips with their AI smarts. It seems the looming prospect of Trump's tariffs causing economic disruption is playing a part, pushing consumers toward frugality. Intel revealed during its recent earnings call that its Intel 7 process node production capacity was facing shortages, something it predicted would "persist for the foreseeable future." Intel's more recent generations of processors - Meteor, Arrow, and Lunar Lake - use TSMC's newer process nodes, so what's causing the problems? The company said the shortage of 7nm production capacity was due to an unexpected surge in demand for its N-1 and N-2 products: Raptor Lake and Alder Lake. A survey of more than 20,000 tech enthusiasts last year showed that 84% of participants would not be willing to pay extra money for hardware with AI capabilities. Beyond a lot of people preferring to save money rather than opting for a slightly more powerful CPU that is AI-focused, the prospect of US tariffs is playing a part. Many are worried about the prices of goods rising as a result of the tariffs, leading to belt-tightening among many consumers. "What we're really seeing is much greater demand from our customers for n-1 and n-2 products so that they can continue to deliver system price points that consumers are really demanding," said Intel's Michelle Johnston Holthaus. "As we've all talked about, the macroeconomic concerns and tariffs have everybody kind of hedging their bets and what they need to have from an inventory perspective. And Raptor Lake is a great part. Meteor Lake and Lunar Lake are great as well, but come with a much higher cost structure, not only for us, but at the system ASP price points for our OEMs as well." Trump has exempted chips from the tariffs, but Intel could suffer from the retaliatory tariffs China has placed on US imports - chips manufactured in the US could face levies of 85% or higher. "The very fluid trade policies in the US and beyond, as well as regulatory risks, have increased the chance of an economic slowdown with the probability of a recession growing," said Intel's finance chief David Zinsner. "We will certainly see costs increase." "Demand for older-generation chips is a flashing macro signal," Michael Ashley Schulman, chief investment officer at Running Point Capital, told Reuters. "In a shaky economic climate, 'good enough' beats bleeding edge." Elsewhere in the earnings report, new Intel CEO Lip Bi-Tan confirmed reports that the company will be laying off a number of employees, undertaking a major restructuring, and those on hybrid work schedules will need to increase the number of days they come into the office from the current three to at least four.