Intel spent $2 billion to buy another AI chip startup, and a Wall Street analyst shows the deal suggests its AI master plan is struggling

• Intel just another AI chip startup, Habana Labs, for $2 billion - a move that the company says "advances" and "turbo charges" the semiconductor giant's AI game plan.
• But the purchase is a head-scratcher for a Wall Street analyst, who said the sizable purchase sends a puzzling signal.
• It appears to muddle Intel's existing AI game plan, which hinges on Nervana, the other AI chip startup Intel bought in 2016.
• "This suggests to me that Nervana is not going that well," Bernstein Research analyst Stacy Rasgon told Business Insider. "They said Nervana was going to be the backbone of their AI effort. Now they're taking another shot with someone else."
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Intel just bought another AI chip startup, the Israel-based Habana Labs, for $2 billio - a move that the tech giant says "advances" and "turbo-charges" its AI strategy.

But the purchase is a head scratcher for a Wall Street analyst who said the purchase send a puzzling signal and appears to muddle Intel's vaunted AI game plan.

The Israel-based Habana Labs develops chips used to power data centers. Its technology is based on the branch of AI called Deep Learning makes it possible for a computing system to mimic the way the human brain works through artificial neural networks. These networks are able to pick up, record and process data and signals and then organize the information similar to the way human memory operates.

"This acquisition advances our AI strategy," Navin Shenoy, general manager of Intel's data platforms group, said in a statement. "More specifically, Habana turbo-charges our AI offerings for the data center."

The Habana Labs deal follows two earlier purchases, including Nervana, which had expected to lead the charge for Intel on the AI front. Intel also bought a startup called Movidius that makes chips for computer vision, which allows AI systems to "see."

Bernstein Research analyst Stacy Rasgon said the acquisition of Habana Labs "suggests to me that Nervana is not going that well.

"At once point, Nervana was supposed to be the backbone of their AI efforts," he told Business Insider. "They said Nervana was going to be the backbone of their AI effort. Now they're taking another shot with someone else."

Nervana, which was considered a pioneer in the AI chip industry, was acquired by Intel in 2016 for a reported price of $400 million. Nervana's founders, Naveen Rao, Amir Khosrowshahi and Arjun Bansal, joined Intel to lead the company's AI initiative. Bansal left recently to launch his own startup. Rao is now general manager of Intel's AI platforms group.

Intel unveiled its first AI chip built from the ground up. But the chip giant is still struggling to catch up to rival Nvidia, which took an early lead in AI processors after it turned out that its flagship graphical hardware was also very well-suited to doing the heavy computational lifting involved in AI.

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