Nvidia Invests $5 Billion in Intel

Ed Ludlow, Bloomberg Technology Co-Host, breaks down what to expect from Nvidia's $5 billion Intel investment.

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 PC chips and also provide its processors for data center products built around Nvidia hardware. 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.

The new funds for Intel come after the US government agreed in August to take a roughly 10% stake in 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. Its current operations, hit by market share losses, cannot shoulder the burden of intensive spending associated with trying to build leading-edge semiconductors.

Intel’s stock surged by as much as 28% after markets opened in New York. On paper, the value of the US government’s stake has jumped more than 55% to $4.9 billion.

The tie-up between the two Santa Clara, California-based rivals underlines how the balance of power in the computer industry has shifted. Intel is getting a financial shot in the arm and access to market-leading technology from a company that it once relegated to a niche role on the industry’s fringes.

“This historic collaboration tightly couples Nvidia’s AI and accelerated computing stack with Intel’s CPUs and the vast x86 ecosystem — a fusion of two world-class platforms,” Nvidia Chief Executive Officer Jensen Huang said in a statement. “Together, we will expand our ecosystems and lay the foundation for the next era of computing.”

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. AMD’s stock fell as much as 5.9% on the news of Nvidia’s investment in Intel. Meanwhile, ASML Holding NV, the Dutch chipmaking equipment maker that counts Intel as a major customer, rose as much as 8.2% in Amsterdam.

AMD is also Nvidia’s closest competitor in graphics chips. The AI leader continues to evaluate whether to outsource production of its chips to Intel, but has no current plans to do so.

In data centers, where Nvidia’s artificial intelligence accelerators dominate and have pushed Intel and others to minor roles, Intel will provide its rival with processors for integration into some products. As Nvidia increasingly combines its AI chips into larger computing clusters, processors are required to handle the general tasks that its graphics semiconductors are not ideally suited to.

“We appreciate the confidence Jensen and the Nvidia team have placed in us with their investment and look forward to the work ahead as we innovate for customers,” Intel CEO Lip-Bu Tan said in the statement. “Intel’s x86 architecture has been foundational to modern computing for decades – and we are innovating across our portfolio to enable the workloads of the future.”

Nvidia currently designs its own processors – which work alongside the accelerator components – using technology from Arm Holdings Plc. Company representatives said its plans for in-house processors have not changed.

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.

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