Fed Cuts Rates, AI Spending Soars to $1.5T, and NVIDIA Invests $5B in Intel for Custom Chip

Business of Tech: Daily 10-Minute IT Services Insights

NVIDIA has made a significant move by investing $5 billion in Intel, acquiring approximately 4% ownership of the company. This partnership aims to co-develop custom data center and personal computer products, integrating NVIDIA's advanced AI and accelerated computing capabilities with Intel's leading CPU technologies. The collaboration is expected to create custom x86 chips that will be manufactured by Intel to NVIDIA's specifications, potentially generating an annual opportunity worth between $25 and $50 billion once the products are launched. Despite this partnership, Intel will continue to develop its own ARC graphic processing units, although the messaging around this dual focus may create confusion.

The Federal Reserve has cut interest rates by a quarter point, a decision framed as a risk management measure amid a cooling labor market. While job gains have slowed and inflation remains high, the Fed's cautious approach indicates limited support for deeper cuts. In the tech sector, the U.S. personal computer industry is facing challenges, with shipments declining due to inventory issues and consumer reluctance to upgrade their devices, even with the impending end of support for Windows 10. This stagnation in consumer sales reflects broader economic uncertainties as buyers prioritize essential expenses.

Meanwhile, global spending on artificial intelligence is projected to reach nearly $1.5 trillion this year, driven by a boom in cloud data center construction and rising enterprise investments in AI technologies. Despite the enthusiasm surrounding AI, a recent McKinsey report reveals that 80% of companies utilizing generative AI have not seen tangible impacts on their earnings, highlighting a disconnect between the hype and real-world performance. As stock prices rise, recession signals are emerging, suggesting a need for caution in an increasingly concentrated market.

Managed service providers (MSPs) are strategically positioned within a $608 billion industry, despite a decline in optimism regarding significant revenue growth. The demand for managed IT services continues to rise, with many providers diversifying their revenue streams by offering consulting and design services. Additionally, IT outages are costing businesses an estimated $76 million annually, emphasizing the importance of uptime over tools. As the landscape evolves, providers must focus on delivering outcomes rather than competing solely on software, ensuring that customers receive the value they need to maintain business continuity.

Three things to know today

00:00 Fed Rate Cut, PC Sales Slump, and $1.5T AI Hype: Why IT Providers Must Focus on Security and Outcomes

04:36 $76M Downtime Losses, Cooling MSP Optimism, 7x Security Multipliers, and Mainframe ROI—All Point to Services as the Real Value

08:16 Nvidia Buys 4% of Intel in $5B Deal, Betting on Custom AI Chips for Servers and PCs

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