Signalling a dramatic turn in Silicon Valley’s power dynamics, Nvidia on Thursday announced a $5 billion investment in Intel — a bold show of support for the embattled US chipmaker, just weeks after the White House brokered a deal for the federal government to acquire a major stake in the firm.
The stake will instantly make Nvidia one of Intel’s largest shareholders, giving it roughly 4% of the company after new shares are issued to complete the deal. Nvidia’s support represents a new opening for Intel after years of turnaround efforts failed to pay off, and it triggered a 29% jump in the US manufacturer’s shares.
Trump Admin Not Involved
The company – once the chip industry’s flag bearer that claimed to put the “silicon” in Silicon Valley – appointed a new CEO, Lip-Bu Tan, in March. He quickly came under fire from US elected officials, including President Donald Trump, who called for him to resign due to concerns about his connections with China. That led to a swiftly arranged meeting in Washington that ended with Intel’s unusual arrangement to give the US a 10% stake in the company.
A White House official said on Thursday that the Trump administration was not involved in Nvidia’s investment in Intel, even though Nvidia CEO Jensen Huang was seen with Trump and other business leaders during the US president’s state visit to the United Kingdom on Thursday.
This new pact includes a plan for Intel and Nvidia to jointly develop PC and data center chips, but crucially will not involve Intel’s contract manufacturing business, known as a “foundry” in the chip industry, making computing chips for Nvidia. Intel’s foundry business will, however, supply the central processors and advanced packaging for the joint products.
Most analysts believe that for Intel’s foundry to survive, it would need to win a large customer such as Nvidia, Apple, Qualcomm or Broadcom.
“This may be the first step of an acquisition or breakup of the company (Intel) among US chip makers though it is entirely possible the company will remain a shadow of its former self but will survive,” said Nancy Tengler, CEO of Laffer Tengler Investments.
Nvidia, whose must-have chips are powering a global artificial intelligence boom, said it would pay $23.28 per share for Intel common stock, slightly below the $24.90 Wednesday closing price but higher than the $20.47 price the US government paid. Nvidia shares were up 3.5% on Thursday.
The companies did not disclose the financial terms of their collaboration but said they would make “multiple generations” of future products.
The deal adds to Intel’s growing reserve of capital, following a $2 billion investment from Softbank and the $5.7 billion investment from the US government.
CEO Tan has vowed to make Intel’s operations lean and build factory capacity only when there is demand to match it.
“This is a massive game-changer for Intel and effectively resets its position of AI-laggard into a cog in future AI infrastructure,” said Gadjo Sevilla, senior AI and tech analyst at eMarketer.
Risks To Competitors
The pact represents a potential risk to Taiwan’s TSMC. TSMC currently manufactures Nvidia’s flagship processors, a business the world’s most valuable company could one day extend to Intel. AMD, which competes with Intel for supplying chips to data centers, also stands to lose thanks to Nvidia’s backing.
TSMC declined comment; AMD did not respond to a request for comment.
“AMD has been seizing market share in desktops and laptops for quite some time and this will help Nvidia out against its closest domestic peers, but I think TSMC may have the bigger risk to its operation over the long term,” said David Wagner, portfolio manager at Aptus Capital Advisors.
Under the terms of the deal, Intel will design custom data-center central processors Nvidia plans to package with its AI chips, known as GPUs. A proprietary Nvidia technology will let the Intel and Nvidia chips communicate at higher speeds than before.
Speedy links are a key differentiator in the AI market because many chips must be strung together to act as one to chew through massive amounts of data. Currently, Nvidia’s best-selling AI servers with those links are only available using Nvidia’s own chips; this deal would put Intel on equal footing, giving it a chance to make money off each Nvidia server.
The combined Nvidia-Intel chips could challenge AMD, which is developing its own AI servers, and Broadcom, which also has chip-to-chip connection technology and helps companies such as Alphabet’s Google develop AI chips. Broadcom did not respond to a request for comment.
AMD shares were down 2.8%, while Broadcom shares rose 0.2%.
For consumer markets, Nvidia will provide Intel with a custom graphics chip that Intel can package with its PC central processors with the same speedy links, potentially giving it an edge against AMD.
The companies did not say when the first joint products would come to market, but said their product plans prior to the deal had not changed.
(With inputs from Reuters)
