Nvidia Gives Intel a $5 Billion Helping Hand

Now, that’s just good sportsmanship.

On Thursday, Nvidia announced that it would invest $5 billion into fellow chipmaker Intel for a roughly 4% stake. It’s a friendly gesture to an industry rival (or should we say, rival-in-name-only, given Intel’s prolonged flailing). Rest assured, Nvidia sees plenty of upside for itself in the deal.

Spirit of Competition

Silicon Valley history has a way of repeating itself. Back in 1997, Microsoft invested $150 million into a teetering Apple. Beyond helping a frenemy in need, Microsoft helped ensure there would be a thriving Mac market for Microsoft’s software. In the present day, Nvidia and Intel might be a match made in computer-processing heaven. The two companies — headquartered just two miles from each other in Santa Clara, California — are technically chip-designing rivals, though each excels in different sectors. Despite whiffing amid the AI boom, Intel still holds a majority market share in the personal computer and laptop chip sectors. Nvidia, of course, has essentially owned the much more lucrative AI chip-designing space, with its products now packed into data centers the world over.

It’s why the two firms have had wildly divergent fortunes in the past few years. As recently as 2022, Intel pulled in nearly double the $26 billion in annual revenue of Nvidia. Now? Nvidia is on track for about $200 billion in sales this year, while Intel continues its slow decline. But thanks to Thursday’s deal, the two companies will help each other broach new chip-designing territory:

• Intel will make a new line of its x86 CPUs custom-fit to Nvidia’s AI platforms in data centers, an option that could be preferable for many hyperscaling clients. It will also produce new PC and laptop chips using graphics processing units from Nvidia, giving Nvidia a route into personal computing.
• Nvidia CEO Jensen Huang says the deal overall may be worth $50 billion a year. That could be crucial for the company, which continues to face a regulatory squeeze and rising competition in China.

Intel stock soared more than 22% on Thursday, great news for the US government and Japanese investment giant Softbank, which took 10% and 2% stakes, respectively, in the company last month.

Lost and Foundry: Unfortunately for Intel, the deal does not provide a direct lifeline to its floundering chipmaking foundry. Nvidia stressed it would continue to rely on current contractor TSMC, which means Intel’s foundry remains stuck in something of a doom loop: The capital-intensive unit needs more cash to get off the ground, which means it needs major clients, but no major clients are willing to ditch TSMC until Intel proves it can achieve liftoff. Think Joseph Heller’s Catch-22.