Nvidia (NVDA.O) announced on Thursday it would invest $5 billion in Intel (INTC.O), providing a major boost to the struggling U.S. chipmaker just weeks after the White House arranged an extraordinary deal for the federal government to take a significant stake in the company.
The investment will immediately make Nvidia one of Intel’s largest shareholders, giving it approximately 4% of the company after the new shares are issued. This show of support marks a new opportunity for Intel after years of failed turnaround efforts and caused a sharp increase in the U.S. manufacturer’s shares.
Once the leading company in the chip industry, Intel appointed a new CEO, Lip-Bu Tan, in March. He quickly faced criticism from U.S. elected officials, including President Donald Trump, who called for his resignation over concerns about his connections to China. This led to a meeting in Washington, which resulted in Intel’s unusual agreement to give the U.S. government a 10% stake in the company.
The new pact includes a plan for Intel and Nvidia to jointly develop PC and data center chips. However, the deal will not involve Intel’s contract manufacturing business, known as a “foundry,” making chips for Nvidia. Most analysts believe that for Intel’s foundry to succeed, it needs to secure a major customer like Nvidia, Apple (AAPL.O), Qualcomm (QCOM.O), or Broadcom (AVGO.O).
Nvidia, whose highly sought-after chips are fueling the global artificial intelligence boom, said it will pay $23.28 per share for Intel’s common stock. This price is slightly below Wednesday’s closing price of $24.90 but higher than the $20.47 price the U.S. government paid.
The companies did not disclose the financial terms of their collaboration but stated they would create “multiple generations” of future products. Officials from both companies described the arrangement as a commercial collaboration where they will provide chips to each other to develop products, without any licensing components.
Nvidia has struggled to sell its H20 chips in China, caught between the demands of Washington and Beijing. In mid-August, Trump brokered a deal that granted Nvidia licenses to sell H20 chips to China in exchange for a 15% cut of those sales, but Nvidia has stated it has not yet shipped any H20 chips to China.
While the deal may not solve Nvidia’s China-related issues, analysts noted its political benefits in the U.S. Nvidia CEO Jensen Huang was seen with President Trump and other business leaders during the president’s state visit to the United Kingdom on Thursday. Matt Britzman, a senior equity analyst at Hargreaves Lansdown, commented, “This move aligns with U.S. policy and could help ease restrictions on selling advanced chips to China.”
The investment adds to Intel’s growing capital reserves, which already include a $2 billion investment from Softbank and the $5.7 billion investment from the U.S. government. CEO Tan has pledged to streamline Intel’s operations and build factory capacity only in response to demand.
Risks to Competitors
The new partnership presents a potential risk to Taiwan’s TSMC (2330.TW), which currently manufactures Nvidia’s flagship processors. This business could potentially be extended to Intel in the future.
AMD (AMD.O), a competitor to Intel in the data center chip market, also stands to lose due to Nvidia’s support.
Following the announcement, Intel shares rose about 26% at the open, trading at $31.33. AMD shares fell 4.6%, while Broadcom shares increased by 1.3%. Nvidia’s shares were up 2%. TSMC and AMD did not immediately respond to requests for comment.
David Wagner, a portfolio manager at Aptus Capital Advisors, said, “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.”
Under the terms of the deal, Intel will design custom data center central processors that Nvidia plans to package with its AI chips, known as GPUs. A proprietary Nvidia technology will allow the Intel and Nvidia chips to communicate at unprecedented speeds.
High-speed links are a key differentiator in the AI market because many chips must be linked together to function as a single unit to process large volumes of data. Currently, Nvidia’s best-selling AI servers use only Nvidia’s own chips for these links. This deal will place Intel on equal footing, giving it an opportunity to profit from each Nvidia server.
The combined Nvidia-Intel chips could pose a significant competitive threat to AMD, which is developing its own AI servers, and Broadcom, which also has chip-to-chip connection technology and assists companies like Google in developing AI chips. Broadcom did not immediately respond to a request for comment.
For consumer markets, Nvidia will supply Intel with a custom graphics chip that Intel can package with its PC central processors using the same high-speed links, potentially giving it a competitive advantage over rivals like AMD.
While Intel’s x86 computing architecture has lost some ground to chips with Arm Ltd technology in both data centers and PCs, it still holds a majority market share. The companies did not specify when the first joint products would be released but confirmed that their pre-deal product plans have not changed.
In recent years, Nvidia has entered both the PC central processor and data center central processor markets. Intel has attempted to sell several AI chips that compete with Nvidia and has stated its intention to develop an AI data center server to compete with Nvidia.
