Nvidia announced a $5 billion investment in Intel on Thursday, showing support for the struggling U.S. chipmaker following a recent deal that saw the U.S. government acquiring a significant stake in the company. This investment will make Nvidia one of Intel’s largest shareholders with approximately four percent ownership after the completion of the deal.
The move by Nvidia signifies a fresh opportunity for Intel, which has been undergoing turnaround efforts without significant success. The appointment of a new CEO, Lip-Bu Tan, in March faced criticism from U.S. officials, including former President Donald Trump, over connections with China. Subsequently, an arrangement was made for the U.S. government to acquire a 10 percent stake in Intel.
Nvidia, known for its essential chips driving the global artificial intelligence sector, stated that it would pay $23.28 per share for Intel common stock, slightly below the closing price of $24.90 per share on Wednesday but higher than the price paid by the U.S. government for its recent stake in Intel.
The collaboration between Intel and Nvidia will focus on jointly developing PC and data center chips, excluding Intel’s contract manufacturing business. This partnership aims to enhance communication speeds between Intel and Nvidia chips, crucial for the AI market where multiple chips need to work together efficiently.
While Intel has faced challenges from competitors using different technologies, it still holds a significant market share in the industry. The Nvidia-Intel partnership could potentially pose a competitive threat to other companies like AMD and Broadcom in the development of AI servers and chip-to-chip connections.
Financial details of the collaboration were not disclosed; however, both companies expressed plans to create multiple future product generations. The deal aligns with U.S. policy objectives and could alleviate restrictions on advanced chip sales to China, benefiting both Nvidia and Intel financially and strategically.
Intel’s recent influx of capital from various sources, including investments from Softbank and the U.S. government, adds to its financial stability. Meanwhile, Nvidia continues to navigate challenges in selling its chips in China amid regulatory complexities and geopolitical tensions.
China’s recent ban on purchasing Nvidia’s AI chips as it seeks to bolster its domestic chip industry highlights the shifting dynamics in the global semiconductor market. The Nvidia-Intel partnership reflects a strategic move to capitalize on the evolving landscape of technology and artificial intelligence.
