While Intel's Larrabee isn't a GPU (it's a graphics capable processing unit, or GCPU), it will still nonetheless be a piece of silicon that competes directly with NVIDIA and AMD/ATI. But which company will be squeezed the most?
Currently AMD/ATI and NVIDIA control some 98% of the discrete GPU market, so the entry of a third player into the pond is likely to cause a fair few ripples and I can't help but feel that there will be casualties. Why? Because Intel is already a big hitter in the graphics market. When you look at the overall graphics market (notebooks and desktops, integrated graphics and discrete), Intel is already well ahead of the rest of the pack, commanding 47.3% of the market (with AMD/ATI holding onto 18.1% and NVIDIA 31.4%).
The trend for the year ending Q2 08 was that Intel, NVIDIA and AMD/ATI saw positive year-on-year growth (46.0%, 11.9% and 7.9% respectively), while VIA/S3, Matrox and SiS saw a decline (-84.0%, -23.1% and -9.5% respectively). Given this state of affairs I'd expect Intel to make life very hard for the minor players (VIA/S3, Matrox and SiS) and eat into AMD/ATI's growth more than that of NVIDIA's. Given AMD's current financial situation, any erosion of growth by Intel could be very bad news for the company, which is already struggling to get back to profitability after seven straight quarterly losses.
I expect that Intel will enter the GCPU market aggressively. After all, it has the cash and the connections to do just that. Also, just as we've seen the company do with CPUs, I expect that Intel will squeeze the competition by engaging in a price war.
The winner - consumers.