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Nvidia will invest $5bn in Intel and co-develop chips for PCs and data centres
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Intel will use Nvidia graphics tech in PC chips and provide processors for Nvidia data products
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Intel shares rose 23% after the announcement, their biggest jump since 1987
Nvidia Corp. agreed to invest $5 billion in Intel Corp. and said the two will co-develop chips for PCs and data centers, a surprise move to help prop up an ailing archrival that sent Intel shares soaring.
Nvidia will buy Intel common stock at $23.28 per share, the two companies said on Thursday. Intel will use Nvidia’s graphics technology in upcoming personal computer chips and also provide its processors for data center products built around Nvidia hardware.
Intel and Nvidia billed their agreement as a product hook-up that gives them the opportunity to move into areas of the computer market they don’t currently reach, an overall opportunity that may be worth as much as $50 billion a year, according to Nvidia’s Chief Executive Officer Jensen Huang. Investors saw the announcement as a shot in the arm for Intel as the company struggles to stem losses and catch competitors, like Nvidia, that it once dwarfed.
Intel shares surged 23% to $30.57 at the close in New York, the biggest single-day jump since October 1987. Nvidia stock gained 3.5% to $176.32 and has increased 31% this year.
The new funds for Intel follow the US government’s decision in August to take a roughly 10% stake in the company and President Donald Trump took on the role of pitchman. Japan’s SoftBank Group Corp., which has committed to invest tens of billions into US chipmaking and cloud infrastructure, made a surprise $2 billion investment last month and Intel is also raising cash by selling assets to investors.
The chipmaker’s current operations, hit by market share losses, can’t shoulder the burden of intensive spending associated with trying to build leading-edge semiconductors. On paper, the value of the US government’s stake has jumped by more than 55%, or $4.9 billion, and is now worth about $14 billion.
“We thought it was going to be such an incredible investment,” Huang said on a conference call Thursday with his Intel counterpart, Lip-Bu Tan. “The return on that investment is going to be fantastic.”
Huang said the engineering teams of the two companies have been working on the agreement for about a year and the deal wasn’t prompted by the Trump administration. He said he called Secretary of Commerce Howard Lutnick to inform him about the companies’ cooperation and Lutnick’s reaction was “supportive.”
Under the deal, Intel will offer PC chips that combine general-purpose processing with powerful graphics components from Nvidia, better helping it compete with Advanced Micro Devices Inc., which has been seizing market share in desktops and laptops. The two companies didn’t offer a timeline for when the first parts will go on sale and said the announcement doesn’t affect their individual future plans.
AMD’s stock fell as much as 5.9% on the news of Nvidia’s investment in Intel before regaining most of the decline. AMD is also Nvidia’s closest competitor in graphics chips. Nvidia continues to evaluate whether to outsource production of its chips to Intel, but has no current plans to do so.
AMD said the announcement hasn’t changed its belief it can keep taking business away from Intel.
“We’re confident in our ability to continue driving innovation and market share growth and reinforcing AI as the company’s top strategic priority,” AMD said in an emailed statement.
The news is “very marginally negative for AMD,” Wolfe Research analysts said in a note, and likely doesn’t change their thesis for Intel. “What’s unclear is whether this represents token cooperation intended for political purposes, or if it’s the start of a wider collaboration that would more significantly benefit Intel,” they said.
“Whether or not Nvidia would be willing to collaborate on manufacturing is a much more important issue,” the Wolfe analysts added, saying Intel suffers from a lack of volume in its manufacturing facilities.
In data centers, where Nvidia’s artificial intelligence accelerators dominate and have pushed rivals to minor roles, Intel will provide processors for integration into some Nvidia products. As Nvidia increasingly combines its AI chips into larger computing clusters, processors are required to handle the general tasks not ideally suited for its graphics semiconductors.
The deal helps Intel address two of its biggest areas where improvement is needed, according to CEO Tan. It helps with one of his priorities to improve his balance sheet and puts Intel on the path to fielding products that will delight customers, he said.
Nvidia currently designs its own processors — which work alongside the accelerator components — using technology from Arm Holdings Plc. The Intel tie-up should have no impact on Arm, Huang said. Nvidia is proceeding as planned with Arm-based products, he said.
At Wednesday’s close, Intel had a market value of $116 billion, meaning Nvidia is taking a less than 5% stake. Nvidia has a market capitalization of more than $4 trillion.
Nvidia’s power to determine the future of the industry, and now Intel’s pragmatic attempt to work alongside it, is based on Nvidia’s utter dominance of AI computing. The company saw the need for new types of chips and software ahead of the debut of services such as ChatGPT from OpenAI and had them ready before any of its rivals. When the world’s biggest companies rushed to build data centers to make sure they could compete in the new era of computing, they turned to Nvidia’s chips.
As recently as 2022, Intel had more than twice as much revenue as Nvidia. The company that gave Silicon Valley its name dominated computing from laptops to data centers with its microprocessors. But it was slow to field the type of accelerator chip that Nvidia offers for AI and has failed to garner meaningful market share in that area.
This year, Nvidia is on course for sales of about $200 billion, according to Wall Street estimates. At some point next year, it’ll be pulling in more revenue per quarter than Intel gets in a year. Its data center unit alone is bigger than any other chip company’s sales.
Intel’s failure to anticipate and exploit spending on AI-specific computing compounded the problems it was suffering from a loss of manufacturing leadership. For decades, Intel plants had the best manufacturing technology making its products better, even if others produced comparable designs.
Now it’s forced to turn to Taiwan Semiconductor Manufacturing Co. to produce its best chips. TSMC’s rapid improvements in technology have enabled many companies – from Apple Inc. to Nvidia – to turn good designs into industry-leading products.
Under new leader Tan, brought in earlier this year to replace the ousted Pat Gelsinger, Intel has said it will pursue a more open approach, seeking out partnerships and opening its plants to rivals.
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