Intel’s Former CEO Made a Big Bet on the Company’s Future. It Cost Him His Job

Summary

WSJ Tech News Briefing - December 9, 2024

Host: Danny Lewis
Produced by: Julie Chang, Supervising Producers Melanie Roy and Katherine Millsop
Release Date: December 9, 2024

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Introduction

In this episode of WSJ Tech News Briefing, host Danny Lewis delves into two major stories shaping the technology landscape: the rise of Chatbot Arena, a groundbreaking platform for ranking AI chatbots, and the sudden resignation of Pat Gelsinger, the former CEO of Intel. These narratives not only highlight significant advancements and challenges in the AI and semiconductor industries but also shed light on the broader implications for technology innovation and national security.

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Feature 1: Chatbot Arena - The Battleground for AI Excellence

Overview

The episode opens with an exploration of the explosive growth of AI chatbots over the past few years, spotlighting major players like OpenAI's ChatGPT, Anthropic's Claude, Google's Gemini, and Xai's Grok. Amidst this proliferation, Chatbot Arena emerges as a pivotal platform where these AI systems are pitted against each other to determine the most effective and innovative solutions available.

Creation and Purpose

Miles Krupa, WSJ Tech Reporter, explains the genesis of Chatbot Arena:

"[Chatbot Arena] is basically a battle zone, or an arena, as they call it, for these chatbots. So anybody can come to the website, ask a question, and get side by side responses from two different chatbots and then rank which one they think is the best." [02:09]

Created by two students at the University of California, Berkeley, the platform allows users to evaluate and compare different AI models, fostering a competitive environment that drives improvement and innovation within the AI sector.

Selection and Evaluation Process

Chatbot Arena hosts a wide array of chatbots, including those from major corporations and emerging startups. The selection process is inclusive, accepting submissions for proprietary, non-open-sourced models under the condition that developers provide free access, as the project relies on Berkeley's funding and operates within a tight budget.

"They basically accept any and all submissions for so called proprietary models that aren't open sourced... they rely on the companies that provide access to these models to do it free of cost." [03:20]

Impact and Surprises

One notable success story is the inclusion of the Yi model from China, which unexpectedly secured the sixth position on the leaderboard shortly after its debut:

"It was honestly a surprise to many in the US who might not have been keeping as close of an eye on the Chinese AI scene to have a model kind of come out of nowhere and be immediately competitive." [03:46]

Furthermore, Chatbot Arena has served as a testing ground for unreleased models. A prime example is OpenAI's GPT-4.0, which generated significant buzz when an early version was anonymously tested on the platform:

"[GPT-4.0]... was actually one of the biggest events in terms of traffic for Chatbot Arena and really helped them take off even further." [04:21]

Conclusion on Chatbot Arena

Chatbot Arena has rapidly become the go-to resource for both AI enthusiasts and industry professionals to benchmark and understand the evolving capabilities of various AI chatbots. By democratizing the evaluation process, it provides transparency and fosters a competitive spirit that accelerates technological advancements.

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Feature 2: The Rise and Fall of Intel’s CEO Pat Gelsinger

Background and Career at Intel

The second major story covers the turbulent tenure of Pat Gelsinger, Intel's former CEO, whose departure has significant ramifications for the company and the broader semiconductor industry. Asa Fitch, WSJ Reporter, provides an in-depth analysis:

"Gelsinger had two careers at Intel... he became a really important employee of Intel, an important engineer who helped vault Intel's chips to the dominant position that they enjoyed for many, many years." [07:01]

Gelsinger's initial career at Intel began at 18, where his technical prowess and leadership led him to design pivotal chips like the 386 and 486, cementing Intel's dominance in the personal computer market during the 1980s and 1990s. His rise to the role of Chief Technology Officer (CTO) in 2000 marked him as a key figure within the company.

Return as CEO and Ambitious Turnaround Plan

In 2021, Intel enlisted Gelsinger to spearhead its turnaround:

"Gelsinger was seen as... a blast from the glorious past of Intel... the company under his previous CEOs had struggled with its manufacturing... Gelsinger had a very bold plan to revive the company and bring it back." [08:40]

His strategy focused on two main pillars:

1. Launching a Contract Chip Manufacturing Business akin to TSMC, aiming to diversify Intel's revenue streams.
2. Reinvigorating Intel’s Core Chip Manufacturing to compete directly with industry leaders like TSMC and Samsung, thereby reclaiming technological supremacy.

Challenges and Failure of the Turnaround Plan

Despite the bold vision, Gelsinger's plan encountered multiple obstacles:

"One issue was the foundry business. This contract manufacturing business simply did not gather a ton of customers." [10:27]

Additionally, the AI boom shifted profits toward competitors:

"The profits from the AI boom went pretty much exclusively to Nvidia... Tech budgets at companies were being spent on Nvidia's chips, not Intel's." [10:27]

These challenges undermined Intel's efforts to regain its market position, leading to diminished confidence from the company's board.

Resignation and Implications

Gelsinger's abrupt resignation signals a pivotal moment for Intel:

"The board lost confidence in Gelsinger and gave him the option to either retire or be removed... he chose to retire abruptly." [11:25]

His departure leaves Intel at a crossroads, enfrentando la búsqueda de un nuevo líder que pueda realinear la estrategia de la empresa con el dinámico panorama tecnológico actual.

National and Industry Impact

Intel's struggles have broader implications for the U.S. semiconductor industry and national security:

"If Intel can't manufacture chips at the cutting edge, then the US loses a lot of sort of prestige or capability in what has become an extremely critical industry." [11:55]

With nearly $8 billion allocated under the 2022 Chips Act to bolster Intel's manufacturing capabilities, the company's inability to innovate could erode the United States' standing in a sector vital for technological and geopolitical dominance.

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Conclusion

Today's episode of WSJ Tech News Briefing underscores the rapid evolution and competitive intensity within the technology sector. Chatbot Arena exemplifies how grassroots initiatives can influence and shape AI advancements, providing invaluable insights and benchmarks for both developers and users. Conversely, the saga of Pat Gelsinger's leadership at Intel highlights the formidable challenges faced by legacy tech giants in adapting to disruptive market shifts, especially in the high-stakes semiconductor industry. As Intel navigates its future without Gelsinger, the outcomes will reverberate across global technology landscapes and national security considerations.

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Notable Quotes:

• Miles Krupa (02:09): "What they've created is basically a battle zone, or an arena, as they call it, for these chatbots."
• Miles Krupa (03:20): "They basically accept any and all submissions for so called proprietary models that aren't open sourced."
• Miles Krupa (03:46): "It was a surprise to many in the US who might not have been keeping as close of an eye on the Chinese AI scene..."
• Asa Fitch (07:01): "Gelsinger became a protege of the CEO at the time, Andy Grove..."
• Asa Fitch (08:40): "Gelsinger had a very bold plan to revive the company and bring it back."
• Asa Fitch (10:27): "The profits from the AI boom went pretty much exclusively to Nvidia."
• Asa Fitch (11:55): "If Intel can't manufacture chips at the cutting edge, then the US loses a lot of sort of prestige or capability in what has become an extremely critical industry."

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Stay Informed: For more insights and updates, tune in to the next episode of WSJ Tech News Briefing.

Transcript

[Merrill Lynch]

Say this is your financial life. Over time, things can get more complex. With a personalized plan, Merrill can help you navigate it all. Learn [e-mail] Bullish Merrill, a bank of America company. What would you like the power to do?

Investing involves risk Merrill Lynch, Pierce Fenner and Smith Incorporated Registered Broker Dealer Registered investment Advisor Member SIPC A wholly owned subsidiary of bank of America Corp.

[Danny Lewis]

Welcome to Tech News briefing. It's Monday, December 9th. I'm Danny Lewis for the Wall Street Journal. The people running the biggest names in the artificial intelligence sector, from OpenAI to Google, have their eyes on one website, Chatbot Arena. It's a place where people can go and put AI chatbots head to head to find out which give the best results. We'll hear how a rankings website made by university students became so closely watched by the AI. And then last week, Intel CEO Pat Gelsinger abruptly announced he was stepping down from his job and the board of the company where he'd worked for most of his career. Gelsinger's departure from intel raises big questions about the ambitious and costly turnaround plan he devised for the company. WSJ reporter Asa Fitch explains what this means for the future of intel and of the United States chipmaking industry. But first, in just the last few years, there's been an explosion of artificial intelligence chatbots. There's OpenAI's ChatGPT, Anthropic's Claude, Google's Gemini, and Xai's Grok, just to name a few. But it can be really hard for people who aren't AI researchers to know which ones are the best. Enter Chatbot Arena, a website created by two students at the University of California, Berkeley, that's quickly become the most watched ranking of AI systems. WSJ tech reporter Miles Krupa has been looking at how they assess these systems. He joins us now. Miles, how does Chatbot arena determine its AI rankings?

[Miles Krupa]

What they've created is basically a battle zone, or an arena, as they call it, for these chatbots. So anybody can come to the website, ask a question, and get side by side responses from two different chatbots and then rank which one they think is the best.

[Danny Lewis]

So what chatbots can you find on there?

[Miles Krupa]

They have most of the ones that people care about. And what they're testing is not so much like the ChatGPT products that we all consume every day or Google's Gemini consumer chatbot that might be on your phone. What they're testing is the basic technology, the large language models that power these chatbots, and so on. That Front, they have multiple ones from OpenAI, multiple from Google, Anthropic, Meta, Mistral, all of the major players, basically.

[Danny Lewis]

But in addition to a lot of the big names that our listeners might be familiar with, there's a ton of startups with their own chatbots and models that have cropped up as the AI industry has grown. How does the team behind Chatbot arena decide which ones to test?

[Miles Krupa]

Yeah, they basically accept any and all submissions for so called proprietary models that aren't open sourced. They require that the makers of those models give them free access because this is still just a graduate student project, after all. They have some funding from Berkeley, but these things are still very expensive and so they rely on the companies that provide access to these models to do it free of cost.

[Danny Lewis]

What have they been finding as they test some of these lesser known chatbots?

[Miles Krupa]

Well, it's interesting. I mean, we've had a few surprises over time on the leaderboard. One recently was this Yi model from China. Yi placed sixth on the leaderboard a few months ago, right after it came out. That was a surprise to many in the US who might not have been keeping as close of an eye on the Chinese AI scene to have a model kind of come out of nowhere and be immediately competitive with OpenAI and Meta and the rest.

[Danny Lewis]

Are all the models you can test in Chatbot arena available to the public?

[Miles Krupa]

Yeah. So one thing that they do is they allow these companies to test the chatbots in the arena before they're released publicly. Even if they're not already a fully fledged product, you can test them out on the arena and see what kind of feedback they get. And one of the earliest cases of this was OpenAI testing this model. It was called something like, I'm also a good GPT2 bot. And so it kind of used OpenAI's naming conventions, and people caught on that this was some unreleased new OpenAI model and it generated a ton of buzz. It was actually one of the biggest events in terms of traffic for Chatbot arena and really helped them take off even further. Thousands of people were playing with this bot in the arena, and then a few weeks later it was released as GPT 4.0, which is the model that currently powers ChatGPT.

[Danny Lewis]

That was WSJ reporter Miles Krupa. Coming up, former Intel CEO Pat Gelsinger spent most of his career at the semiconductor pioneer and was a true believer in its work. But when his rescue plan for the storied company failed, its board lost faith in him. What does his abrupt exit mean for Intel's future. That's after the break.

[Merrill Lynch]

Say this is your financial life. Over time, things can get more complex. With a personalized plan, Merrill can help you navigate it all. Learn [e-mail] Bullish Merrill, a bank of America company. What would you like the power to do?

Investing involves risk. Merrill Lynch, Pierce, Vener and Smith Incorporated. Registered broker Dealer Registered investment advisor Member sipc, a wholly owned subsidiary of bank of America Corp.

[Danny Lewis]

In 2021, intel hired its former chief technology officer, Pat Gelsinger to lead its turnaround efforts. As the company raced to catch up to the exploding demand for the chips that power artificial intelligence, he devised an ambitious and expensive plan, but it didn't pan out. And last week Gelsinger abruptly resigned, raising big questions about Intel's future. WSJ reporter Asa Fitch has been covering this story. He joins us now. ASA let's talk about now former CEO Pat Gelsinger. What characterized his career at Intel? How did he go from an entry level job to CEO?

[Asa Fitch]

So Gelsinger had two careers at Intel. Basically his first career at intel began when he was 18 years old. He was very sharp, very energetic, some at the company said a little bit arrogant. But he fit really well in that culture. And he became a really important employee of intel, an important engineer who helped vault Intel's chips to the dominant position that they enjoyed for many, many years. He helped design a chip called the 386 and the successor to 486. These chips were essentially ubiquitous in the personal computers of the 80s and 90s. So Gelsinger became a protege of the CEO at the time, Andy Grove, who's renowned within the industry and generally in corporate history. So Gelsinger rose through the ranks. Undergrove. Eventually he became the company's first chief technology officer, first CTO in 2000, a position he held for number of years. But eventually he was forced out of the company in 2009. This was over a project that he oversaw to produce a graphics processing unit and try to compete with Nvidia. And it just essentially didn't work out and he was ousted. So that was his first career. His second career at intel, of course was his return as CEO in 2021. And that tenure was certainly not as successful as his first one. He had a bold vision to transform the company, return intel to the glory that enjoyed Undergrove, his mentor. And it didn't happen for a lot of reasons. But here we are now he's left the company and intel is searching for a new CEO.

[Danny Lewis]

So why did the company Tap him for leadership in 2021.

[Asa Fitch]

Well, Gelsinger was seen as and for sure is a blast from the glorious past of Intel. And so the company had struggled a bit under its previous CEOs, former CFO Bob Swan and Brian Krzanich, who came up through the company's manufacturing operations. But the company company under those two CEOs had kind of struggled with its manufacturing. It struggled to continue to be on top and making the best, fastest chips in the world. And it ceded a lot of that ground to the likes of Taiwan Semiconductor Manufacturing Corporation and Samsung. So when Gelsinger came on, intel wasn't doing that well. It was in a tight spot. And Gelsinger had a very bold plan to revive the company and bring it back. I mean, it was very costly and ambitious, but the idea was to do a couple of things. Gelsinger wanted to open a contract chip manufacturing business like what TSMC had done so successfully in the past number of decades. And the other main part of the transformation was to essentially catch up with TSMC and Samsung in the race to make the best chips possible in the world on the cutting edge. A race that is very, very expensive. He was going really counter to where the industry had gone. Which is the industry in the past couple of decades, really maybe a little bit longer, has essentially broken up people. Usually they only make chips or they only design chips, but intel under Pat Gelsinger was going to do both and was going to go full steam ahead doing both.

[Danny Lewis]

And unfortunately for Gelsinger, it didn't turn out so well for him or Intel. Why did this plan fail?

[Asa Fitch]

One issue was the foundry business. This contract manufacturing business simply did not gather a ton of customers. The other main problem was the dynamics of the market for personal computers and PC chips and server chips. You know, at first in Gelsinger's tenure, those businesses did fairly well. I mean, the COVID epidemic was still on. People were working from home, they needed more computers at home and they were using the Internet more. And that drove sales of Intel's chips. But then came AI. And AI changed everything for intel because the profits from the AI boom went pretty much exclusively to Nvidia. Nvidia was designing the and having these GPUs made by TSMC that became essentially the hottest commodities in tech. And everybody needed them to produce models like ChatGPT and other things like that. And tech budgets at companies were being spent on Nvidia's chips, not Intel's.

[Danny Lewis]

What have Gelsinger and Intel said about his departure?

[Asa Fitch]

Gelsinger has said that it was his dream job to work at intel and obviously it didn't go the way he wanted it to, but clearly very proud of the time that he spent as CEO. But the board hasn't said that much about what their view of the situation is. My understanding is that they simply lost confidence in Gelsinger and they gave him the option to either retire or be removed. And he chose to retire abruptly.

[Danny Lewis]

So what does Intel's success or failure mean for the American chip making industry?

[Asa Fitch]

It's huge for the US Semiconductor industry broadly because intel really is the only American chipmaker that is close to being capable of manufacturing chips at the cutting edge. Cutting edge chip manufacturing largely takes place in South Korea and Taiwan. Although of course Samsung and TSMC are building factories in the U.S. they're not U.S. companies. So for the U.S. and the U.S. government, Intel is kind of a point of national pride and national security importance. And Intel's getting a lot of money actually to help it build new chip plants under the 2022 Chips Act. It's getting nearly $8 billion for that. If intel can't manufacture chips at the cutting edge, then the US loses a lot of sort of prestige or capability in what has become an extremely critical industry and a critical realm of investment from a government perspective.

[Danny Lewis]

That was our reporter Asa Fitch. And that's it for Tech News Briefing. Today's show was produced by Julie Chang with supervising producers Melanie Roy and Katherine Millsop. I'm Danny Lewis for the Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.

[Merrill Lynch]

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