Intel stock surges as Nvidia announces $5 billion stake in company
Intel (INTC) stock spiked roughly 23% Thursday after leading AI chipmaker Nvidia (NVDA) said it will take a $5 billion stake in the struggling company.
Nvidia said Thursday in a press release that it will invest $5 billion in Intel’s common stock, pending regulatory approval.
That would represent a roughly 4% stake in the company and bring recent outside investment in the chipmaker to $16 billion. The US government made a $9 billion investment in Intel in August shortly after Japanese investment holding company SoftBank Group (SFTBY) made its own $2 billion investment.
Intel’s gain Thursday added roughly $27 billion to its market capitalization, which stood at nearly $143 billion at the close of the trading session.
Nvidia and Intel said that they would jointly develop “multiple generations of custom data center and PC [personal computer] products as part of the agreement unveiled Thursday.” Intel will build custom CPUs (central processing units) with its x86 architecture, or traditional computer chips, for Nvidia to integrate into its AI servers used in data centers to power apps like ChatGPT, and Nvidia’s AI tech will be used in Intel’s semiconductors for personal computers.
Notably, the plan doesn’t involve Intel’s struggling contract manufacturing business, or Intel Foundry Services.
Nvidia’s investment comes as Intel has struggled to catch up in the AI race. The company is the only large-scale leading chip manufacturer based in the US and is seen by some as vital to national security.
Earlier this year, the Trump administration was reportedly in talks with TSMC (TSMC.BA) and Intel to split up the company and hand over Intel’s manufacturing business to its Taiwanese counterpart. While that deal never materialized, the US government drew attention for its unusual move to take a 10% stake in Intel this summer as the Trump administration makes unprecedented deals with the private sector.
Intel designs chips for data centers and personal computers, and while it has always manufactured its own semiconductors, the company opened up that manufacturing business to outside customers in 2021 under former CEO Pat Gelsinger. Intel has aimed to both compete with Nvidia’s AI chips in its design segment and draw in customers such as Nvidia in its manufacturing business — but both efforts have fallen short.
CEO Lip-Bu Tan, who stepped into his role in March, didn’t give many details about the company’s AI strategy in its most recent quarterly report — when the company announced it was laying off 15% of its workforce and shelved plans to build plants in Europe — but the latest partnership with Nvidia offers a potential glimpse into what his strategy could be: relying on its still-dominant CPU business to partner with AI chipmakers rather than taking them on directly.
“This is a game changer deal for Intel as it now brings them front and center into the AI game,” Wedbush analyst Dan Ives wrote in a note to investors Thursday.
Still, the deal would not bolster Intel’s ailing manufacturing business as it looks to bring on outside customers, noted Bernstein analyst Stacy Rasgon. Intel recently said it would only pursue the development of its new 14A manufacturing process, which would be used to develop cutting edge chips, if it can bring in such customers.
“But frankly Intel can use the help on the product business just as much given share position in key markets has been bleeding,” the analyst said in a note Thursday.
“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,” CEO Jensen Huang said in a statement. “Together, we will expand our ecosystems and lay the foundation for the next era of computing.”
