Nvidia announced a $5 billion investment in Intel on Thursday, marking a significant partnership aimed at revitalizing the U.S. chipmaker amid ongoing industry challenges.
This move comes shortly after the U.S. government acquired a 10% stake in Intel through an unprecedented federal arrangement.
The investment positions Nvidia as one of Intel's largest shareholders, holding approximately 4% of the company following the issuance of new shares.
Intel's shares surged 26% in early trading, reflecting market optimism about the potential turnaround for the once-dominant firm.
Nvidia will purchase Intel common stock at $23.28 per share, a price slightly below Intel's previous close but above the government's acquisition rate.
This capital infusion adds to Intel's recent funding, including a $2 billion investment from Softbank and the $5.7 billion from the U.S. government.
Under new CEO Lip-Bu Tan, appointed in March, Intel faces pressures including criticism from U.S. officials over international ties, leading to the government's stake.
The collaboration focuses on joint development of PC and data center chips, excluding Intel's foundry operations.
Nvidia, riding the AI boom with its essential GPUs, seeks to integrate Intel's CPUs for enhanced products without licensing agreements.
The partnership involves creating custom data center central processors by Intel for Nvidia's AI platforms, featuring proprietary technology for faster chip communication essential in AI processing.
For consumer PCs, Nvidia will supply custom graphics chips to pair with Intel's processors, potentially strengthening their market position against competitors.
This alliance could challenge rivals like AMD and pose risks to Taiwan's TSMC, which currently manufactures Nvidia's key components.
Analysts view the deal as aligning with U.S. policy, potentially easing export restrictions.
Intel's x86 architecture maintains a majority share despite losses to Arm-based technologies.
The companies plan multiple generations of products, with no changes to existing timelines, as Intel aims to streamline operations and match factory capacity to demand.
While Intel reported substantial losses last year and anticipates workforce reductions, this pact offers a pathway into the AI ecosystem.