NVIDIA Makes Landmark $5 Billion Investment in Rival Intel to Co-Develop Chips

A Surprising Alliance

In an unexpected move that is set to reshape the semiconductor landscape, NVIDIA announced on Thursday a $5 billion investment into its long-time rival, Intel. The two companies will join forces to co-develop next-generation semiconductors for personal computers and data centers, marking a historic collaboration between the Santa Clara-based giants. The news sent Intel’s stock soaring in response.

According to the joint announcement, NVIDIA will acquire Intel common stock at $23.28 per share. The strategic partnership will see Intel integrate NVIDIA’s leading graphics technology into its future PC chips. In return, Intel will supply processors for NVIDIA’s hardware-focused data center products. For investors, the announcement is seen as a significant boost for Intel, which has been working to reverse its losses and catch up to competitors.

Market Reacts, Intel Shares Skyrocket

Wall Street responded immediately and forcefully to the news. Intel’s shares surged 23% to close at $30.57 in New York trading on Thursday, marking the stock’s largest single-day gain since October 1987. NVIDIA’s shares also saw a healthy bump, rising 3.5% and bringing their year-to-date increase to 31%.

The alliance aims to directly challenge Advanced Micro Devices (AMD), which has been successfully gaining market share from Intel in both the desktop and laptop markets. AMD’s stock fell by as much as 5.9% following the news. While NVIDIA, a leader in the artificial intelligence sector, continues to evaluate using Intel for its chip manufacturing, no such plans have been formalized at this time. The companies did not provide a timeline for when the first products from this collaboration will be available.

Details of the Tech Collaboration

The partnership will cover a wide range of products, from enterprise-level data centers to consumer PCs. A key element of the collaboration involves seamlessly connecting the two companies’ architectures via NVIDIA’s proprietary NVLink technology. This integration will combine NVIDIA’s AI-prowess with Intel’s extensive x86 ecosystem to deliver cutting-edge solutions.

Specific products planned under this new alliance include custom Intel CPUs integrated into NVIDIA’s AI platforms for data centers, and a new x86-based System on a Chip (SoC) for the consumer market that will feature an integrated NVIDIA RTX GPU. This move signifies that Intel is gaining not only crucial financial support but also access to market-leading technology from a company it once relegated to a niche corner of the industry.

A Critical Investment Amidst Broader Support

This investment comes at a critical time for Intel, which has struggled to bear the immense costs of developing advanced semiconductors while facing declining market share. The company has recently been raising capital by selling assets to investors. In August, the U.S. government acquired an approximate 10% stake in the company. This was followed by a $2 billion investment from SoftBank Group, which has committed to investing tens of billions in America’s semiconductor manufacturing and cloud infrastructure.

The U.S. government’s stake, acquired at an agreed-upon price of $20.47 per share for 433.3 million shares, is now valued at approximately $13 billion following Thursday’s stock surge. This represents a $4.4 billion gain on paper since the deal was made.

Ted Weissberg, a trader at Seaport Securities, commented on the significance of NVIDIA’s investment. “Wall Street has many stories of companies that looked dead and came back like a phoenix,” he noted. “While it’s too early to judge the full implications of this investment, it feels like a breath of fresh air.”