Intel shares surge 30% after $5 billion Nvidia investment
The struggling American chip firm received a significant lifeline from its rival, with the companies to join forces on PC and data center chips.
Intel shares surged by over 30% in pre-market trading on Thursday after Nvidia announced that it will invest $5 billion in the struggling U.S. chipmaker.
The pact, which also includes plans for Intel and Nvidia to jointly develop PC and data center chips, poses a potential risk to Taiwan’s TSMC. TSMC currently manufactures Nvidia’s flagship processors, business that could one day shift to Intel. AMD, which competes with Intel in supplying data center chips, also stands to lose from Nvidia’s backing.
Nvidia, whose chips power much of the global artificial intelligence boom, said in a statement it will pay $23.28 per share for Intel common stock, slightly below Intel’s Wednesday close of $24.90 but higher than the $20.47 price the U.S. government paid for a 10% stake in Intel last month.
Nvidia is set to become one of Intel's largest shareholders, likely owning 4% or more of the company once new shares are issued.
The investment marks a new opening for Intel after years of turnaround efforts failed to gain traction. The company, once the industry’s undisputed leader that put the “silicon” in Silicon Valley, appointed a new CEO, Lip-Bu Tan, in March. Tan has pledged to slim down operations and expand capacity only when demand justifies it.
Crucially, the deal does not involve Intel’s contract manufacturing business, known in the industry as a foundry, making chips for Nvidia. Analysts have long believed that for Intel’s foundry unit to survive, it will eventually need to win a major customer such as Nvidia, Apple, Qualcomm, or Broadcom.
Still, the deal bolsters Intel’s balance sheet, weeks after it announced a $2 billion investment from SoftBank and a $5.7 billion cash infusion from the U.S. government. Intel CFO David Zinsner recently told investors the company was in a “good cash position” and would not need much more capital until it begins heavy investment in 14A, its next-generation manufacturing process.
Under the partnership, Intel will design custom data center CPUs that Nvidia will package with its AI GPUs. A proprietary Nvidia technology will enable the Intel and Nvidia chips to communicate at higher speeds than before.
For consumer PCs, Nvidia will provide Intel with a custom graphics chip to pair with its CPUs, using the same high-speed links, potentially giving Intel an advantage over AMD.
Although Intel’s x86 architecture has lost share to Arm-based chips in both PCs and data centers, it still dominates overall market share.
Reuters contributed to this report.
