When you are investor, the ideal thing to invest in is a company which is profitable and growing. A company you can hold on for a number of years, if it does a stock split so much the better and overtime the value of the holding becomes larger or your wealth increases. That is the ideal but if you examine the top companies 30 years ago or 20 years ago or 10 years ago things will change. The change is the hard part because if you bought a profitable company and made money you will have an attachment to it – your read the financial reports, you read stories about the industry and you are thinking you have a winner in that group. However, names change over the years and some companies while still profitable are less profitable and you hope they can turn it around. We all do it, but the lesson is what did you miss over the years, before you bought an alternative.

In an article by Steve Lohr and Don Clark of the New York Times News Service, one of the names for the past 30 years was Intel. The computer chips that powered many computers was Intel and one of their advertising slogans was Intel inside.

In 2005, long before the Artificial Intelligence or AI was considered an investable technology, Intel’s Board of Directors was presented with a proposal to buy Nvidia. The price was about $20 billion. The proposal was eventually turned down because Intel had a poor job of absorbing companies and it would have been Intel’s most expensive acquisition.

Today Nvidia is worth over $3 trillion and Intel is worth about $100 billion. Will somebody buy Intel?

The story of how Intel got left behind in the AI is representative of the broader challenges the company now faces. There were opportunities missed, wayward decisions and poor execution. The trail of missteps was a byproduct of a corporate culture born of decades of success and high profits when Intel’s chips and Microsoft’s software were the twin engines of the fast-growing personal computer industry.

The culture was hard-driving and focused on its franchise in personal computers and later in data centers.

It was a corporate ethos that worked against the company as Intel tried and failed, repeatedly, to become a leader in chips for AI. Projects were created, pursued for years and shut down because Intel’s leadership lost patience or the technology fell short. Investments in newer chip designs invariably took a back seat to protecting and expanding the company’s money-spinning mainstay – generations of chips based on X86 architecture.

In terms of profits, it was a very good course of action, profits roll in.

Going back to Nvidia, Intel’s microprocessors chips excelled in rapidly executing calculations one after another, Nvidia’s chips delivered superior performance in graphics by breaking tasks up and spreading them across hundreds or thousands of processing working in parallel – an approach that would pay off in AI computing.

After the Board decided not to buy Nvidia, Intel worked on a project called Larrabee effort. They spent millions of dollars to be better at graphics than Nvidia. Larrabee was a hybrid, combining graphics with Intel’s PC-style chip design. The chip was not that good and did not meet expectations, after spending millions and every quarter falling behind, the project was cancelled in 2009. Nvidia became a leader in graphics and now the AI revolution.

Linking to dividend paying stocks, profits are wonderful to an investor. Profits in one area will eventually lead to a decline. If you think about a company similar to P&G, they have multiple brands making billions of dollars or are diversified. If the company you invest in is making most of its profits in one area, enjoy it, but be aware that at some point there will be a change and they will make less or grow less.

There are more questions than answers, till the next time – to raising questions.