Nvidia invests $5 billion in Intel, planning to jointly design PC and data center chips.

Nvidia Corp. agreed to invest $5 billion in Intel Corp. and announced that the two companies would jointly develop chips for personal computers and data centers. This unexpected move helped bolster a struggling competitor and sent Intel's stock price soaring.

According to a statement released by both companies on Thursday, Nvidia will purchase Intel common stock at $23.28 per share. Intel will incorporate Nvidia's graphics technology into its upcoming PC chips and provide processors for data center products based on Nvidia hardware. Neither company provided a timeline for the initial product launch and stated that the collaboration will not affect their respective independent future plans. Intel's stock price rose as much as 26% in pre-market trading.

This funding injection came after the U.S. government agreed in August to take a roughly 10% stake. President Trump personally acted as the "salesman." Japan's SoftBank Group unexpectedly invested $2 billion last month, while Intel also raised cash by selling assets. Due to declining market share, its existing business cannot single-handedly bear the enormous expenses required to build cutting-edge semiconductors.

This collaboration between two rival companies headquartered in Santa Clara, California, highlights a shift in the power structure of the computer industry. Intel, which once considered Nvidia a fringe player, is now receiving financial support and technical assistance from the industry leader.

Nvidia CEO Jensen Huang stated in a press release:

“This historic collaboration tightly integrates NVIDIA’s AI and accelerated computing stack with Intel’s CPUs and vast x86 ecosystem – a fusion of two world-class platforms. Together, we will expand our respective ecosystems and lay the foundation for the next era of computing.”

Intel will launch a PC chip combining a general-purpose processor with Nvidia's powerful graphics components to better compete with Advanced Micro Devices (AMD). AMD has been steadily eroding market share in the desktop and laptop markets in recent years and is Nvidia's main rival in the graphics chip field. Meanwhile, Nvidia is still evaluating whether to outsource some chip production to Intel, but currently has no such plans.

In the data center sector, Nvidia's AI accelerators dominate, while companies like Intel are gradually relegated to supporting roles. In this collaboration, Intel will provide processors for some Nvidia products to handle general-purpose tasks that graphics chips are not well-suited for.

Intel's new CEO, Lip-Bu Tan, stated in a press release:

“We thank Jensen Huang and the NVIDIA team for their trust in us and look forward to future collaborations. Intel’s x86 architecture has been the cornerstone of modern computing for decades, and we will continue to innovate our portfolio to support future workloads.”

Currently, Nvidia's self-designed processors are still based on Arm Holdings' technology, and the company has stated that its existing plans will not change.

As of Wednesday's close, Intel's market capitalization was $116 billion, meaning Nvidia's stake was less than 5%. In contrast, Nvidia's market capitalization exceeded $4 trillion.

Industry landscape and impact

• Back in 2022, Intel's revenue was more than double that of Nvidia. But now the situation has completely reversed.
• Nvidia's forward-looking strategy in AI chips and software prepared it well before the explosion of generative AI services like ChatGPT. As global companies raced to build AI data centers, they increasingly relied on Nvidia chips.
• Nvidia's sales are projected to reach $200 billion this year, and its quarterly revenue next year may even exceed Intel's total annual revenue. Its data center division alone generates more sales than any other chip company's overall business.
• Intel's failure to enter the AI-specific chip market in a timely manner, coupled with the loss of its manufacturing process advantage, has led to a rapid decline in its position. Today, it has to rely on TSMC to produce its most advanced chips.

Under the leadership of new CEO Robin Tank, Intel is shifting towards a more open strategy, seeking to collaborate with competitors and open its factories to external partners.