Nvidia Invests US$5 Billion in Intel to Boost AI Chip Development

Nvidia has announced a US$5 billion investment in Intel, acquiring an approximate 4% stake in the corporation. This transaction follows a significant capital injection from the US government and is intended to enhance Intel’s position in the AI and high-performance computing sectors.

Nvidia's investment provides strategic support for Intel. The deal makes Nvidia one of Intel's largest shareholders and signals a joint effort to develop next-generation technologies.

"This is a massive game-changer for Intel and effectively resets its position of AI-laggard into a cog in future AI infrastructure," says Gadjo Sevilla, Senior AI and Tech Analyst, eMarketer.

The background for this transaction is complex. Intel has experienced setbacks in recent years, losing market share to competitors like TSMC and AMD. Previous internal restructuring efforts did not yield the expected results, leaving the corporation in a vulnerable position.

Intel’s appointment of Lip-Bu Tan as CEO was followed by an intervention from the US government, which resulted in its acquisition of a 10% stake. Nvidia's investment, combined with a US$2 billion capital injection from Softbank, gives Intel a more robust financial foundation. Jensen Huang, CEO, Nvidia, clarifies that while the US presidential administration was not directly involved in negotiating the partnership, its support was anticipated.

The alliance focuses on the joint development of chips for PCs and data centers. A key detail of the agreement is that Intel's contract manufacturing business, its foundry, will not produce computing chips for Nvidia. It will, however, supply the central processors and advanced packaging for the jointly developed products. Huang says that Nvidia has been evaluating Intel's foundry technology for nearly a year. According to Reuters, the long-term viability of Intel's foundry depends on its ability to secure high-volume clients such as Apple, Qualcomm, or Broadcom.

For competitors such as TSMC, which manufactures Nvidia's flagship processors, the agreement presents a potential long-term risk should Nvidia move some of its production to Intel. Similarly, AMD, which competes with Intel in the data center chip market, could face increased competitive pressures.

Proprietary Nvidia technology will enable Intel and Nvidia chips to communicate at higher speeds, a key differentiator in the AI market, where interconnecting multiple chips is essential for processing large data volumes. This capability could position the joint Intel-Nvidia products as a competitive alternative to solutions offered by other corporations in the sector.