Rivals To Partners: Nvidia's $5 Billion Investment In Intel Sparks Hope for Chipmaker's Future

Not too long ago, Intel Corp. and Nvidia Corp. were considered arch-rivals in the computing space. Now, in a major policy shift, Nvidia has just invested $5 billion into Intel—a move that may have serious ramifications for the future of AI and computing.

On Thursday, Nvidia, the largest company in the world by market capitalisation, announced it would invest $5 billion in Intel, a struggling US chipmaker that still enjoys immense sentimental value in the computing space due to its Central Processing Unit (CPU) range.

The investment comes just a few weeks after Intel secured a deal with the US federal government to take a massive stake in the company.

Intel shares reacted positively to the news, zooming 23% in trade on Thursday — a much-needed impetus for a stock that has fallen almost 40% in five years. But how exactly did this enemies-to-lovers arc between Nvidia and Intel come about?

In order to understand the implications of Nvidia's investment in Intel, we must take into account what the AI giant is planning to do with the partnership.

In the official statement, Nvidia confirmed that it has signed a 'co-design pact for PC and data center chips' with Intel.

This essentially means Intel can now leverage Nvidia's state-of-the-art Graphics Processing Units (GPUs) to deliver integrated PC chips while Nvidia can utilise Intel's old but reliable CPUs to power its AI data centres. It's a win-win case for both parties.

In the statement, Nvidia has confirmed that it will utilise Intel's CPU ecosystem, including the x86 architecture, which is the most common architecture used by computers across the globe.

This architecture will now be integrated into Nvidia's AI infrastructure for better computing efficiency.

What's in it for Intel? They get to make better chips that integrate Nvidia's graphics chiplets into its System-on-a-Chip (SoC). Think of it like Intel being a plain dosa vendor and Nvidia offering it the recipe to sell masala dosas as well.

In recent years, Intel has fallen behind AMD when it comes to CPUs — its core product offering.

As per data from Passmark Software, Intel's market share in overall CPU market has fallen from 77% at the end of FY18 to 60.6% in Q3FY25.

During the same period, AMD market share has risen from 22.9% to 38.2%.

Despite this trend, the US govt splashed almost $9 billion in August for 10% of Intel's stake. This was part of US President Donald Trump's Great American Company revival plan.

Japan's Softbank also joined the party with a $2 billion investment in the same month. Now, Nvidia has invested $5 billion more, in what appears to be a clear cut plan from Intel to raise cash by selling assets to outside investors.

This is also indicative of Intel's desperate plan to get back into the semiconductor push. For the US government, Intel is a strong counter to China in the AI arms race, due to the company's strong domestic manufacturing base.

According to HDFC Securities' Devarsh Vakil, the partnership between Intel and Nvidia serves as a significant opportunity for the former.

"This partnership follows recent White House efforts to secure government investment in Intel and represents a significant opportunity for the struggling chipmaker after years of failed turnaround attempts. The semiconductor rally extended beyond Intel, with Applied Materials and Micron posting strong gains as the entire sector benefited from the positive sentiment," he said.

Nvidia CEO Jensen Huang has called this marriage as the "fusion of two world-class platforms" while Intel CEO Lip-Bu Tan framed it as a vote of confidence from the biggest AI company in the world.