The fact that they are putting in higher end amd gpus prove that igpus being more powerful is actually a high enough demand. Or the fact that they even turned to amd at all instead of making their own should kill off that theory. Intel and amd partnering? Who would have thought that would happen? Think of mobile, soc, laptops, and sff. These are becoming much more prevalent form factors as they become powerful enough that most people will never buy anything bigger. To a lesser extent, mitx gaming builds could start to get into it as well but similarly, people want smaller.
But they're not going to be able to fit what he's talking about into a cpu. 5120 cores would have to be a dgpu. Even if they fit a mid end 130w gpu, that's getting to the fx 9000s tdp and we all know how well that played out. Not just heat issues but mobos had issues powering them. The only conclusion as I mentioned was dgpus.
If they could compete, any business would be an idiot not to jump in. Especially with ai and deep learning growing as it is, gpus are doing more compute work and at a higher power efficiency than cpus could ever dream of. Xeon phi isn't a cpu or gpu but that's the best intel has to compete and that pales in comparison to performance and efficiency.