In a surprising turn of events, Nvidia has extended a helping hand to its rival Intel through a partnership that could transform the landscape of the semiconductor industry. Announced recently, the deal consists of two primary components: Nvidia will inject $5 billion into Intel’s common stock, joining other significant investors like Softbank and the U.S. government as Intel seeks revival under CEO Lip-Bu Tan. Beyond financial support, the companies are also collaborating on product development for both data centers and personal computers.
Following the announcement, Nvidia’s stock saw nearly a 3% increase, while Intel’s soared over 25%. This significant rise in Intel’s shares highlights the scale of its challenges—financial and operational—much larger than those faced by Nvidia, making the partnership more crucial for Intel’s future prospects. Nevertheless, industry analysts see it as a win for Nvidia as well, reinforcing its stronghold in the semiconductor realm. “What this does is cement Nvidia as being the company that has, basically, a soup-to-nuts offering,” noted Jim Cramer, emphasizing Nvidia’s comprehensive presence in the market.
The collaboration particularly focuses on data centers, where Nvidia dominates with its AI-capable GPUs. Intel will be tasked with creating custom CPUs that work harmoniously with Nvidia’s AI infrastructure. While Nvidia has its own CPU based on the Arm architecture, this partnership will enable it to cater to customers entrenched in the traditional x86 ecosystem, which has historically dominated the data center market.
Despite sharing resources, Nvidia assured investors that its plans to develop its Arm-based CPUs, including the second-generation Vera CPU, are still underway. The partnership with Intel is viewed as a means to better meet the needs of users reliant on x86 CPUs, creating a tighter integration of Nvidia’s GPUs with Intel’s CPUs within server environments.
However, this arrangement has raised concerns for Arm Holdings, which licenses the Arm architecture to customers. Following the announcement, Arm’s stock declined by over 3%, reflecting apprehension about potential shifts in revenue streams toward Intel and away from Arm.
On the personal computer side of the partnership, Intel will embed Nvidia’s graphics capabilities into its system-on-chips (SoCs). These chips, which integrate various computing components into a single silicon entity, aim to enhance the performance of a wide array of personal computers. Nvidia plans to leverage Intel’s integration advantages, exploring a broader share of the consumer PC market, which continues to thrive despite being overshadowed by the booming AI data center market.
As both companies move forward, uncertainty lingers regarding whether Nvidia might eventually tap into Intel’s foundry services for chip manufacturing. While Jensen Huang, Nvidia’s CEO, confirmed that they are currently not planning to do so, he acknowledged ongoing evaluations of Intel’s foundry capabilities. The potential shift in manufacturing dynamics is significant, especially given Intel’s historical role in designing and producing its own chips, though it now faces stiff competition from external foundries like Taiwan Semiconductor Manufacturing Co.
The outcome of this partnership could set the stage for reshaping the semiconductor landscape, and both companies appear poised to capitalize on their respective strengths. Nvidia expressed optimism about its investment in Intel and its potential returns, marking a pivotal moment for both technology giants as they navigate a rapidly evolving industry.
