Intel Shares Jump 22% After Nvidia Plans to Invest $5B in the Company, Jointly Develop AI Chips

Intel (Nasdaq: INTC) shares soared over 22% on Thursday after Nvidia (Nasdaq: NVDA) announced that it will invest $5 billion (£3.7 billion) in Intel's common stock at $23.28 (£17.26) per share. Meanwhile, Nvidia shares also rose 3.5% on the development.

'This is a game-changer deal for Intel as it now brings them front and centre into the AI game,' Wedbush analyst Dan Ives wrote in a note to investors Thursday.

The investment, which is subject to customary closing conditions like regulatory approval, will make Nvidia one of Intel's top shareholders with a stake of almost 4%. The US government recently took a 10% stake in Intel.

The investment entails plans for the companies to jointly develop custom data centre and personal computing products to accelerate applications across hyperscale, enterprise, and consumer markets. There will be integration of Nvidia's AI computing with Intel's CPU technologies and x86 ecosystem.

For data centres, Intel will develop custom x86 CPUs that Nvidia will integrate into its AI infrastructure platforms. In the personal computing space, Intel will create and offer to the market x86 system-on-chips (SoC) that combine Nvidia RTX graphics processing unit chiplets to power a range of personal computers demanding high computing power.

'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. Together, we will expand our ecosystems and lay the foundation for the next era of computing,' Nvidia CEO Jensen Huang stated in the press release.

'Intel's leading data centre and client computing platforms, combined with our process technology, manufacturing and advanced packaging capabilities, will complement NVIDIA's AI and accelerated computing leadership to enable new breakthroughs for the industry,' said Intel CEO Lip-Bu Tan.

However, the agreement did not mention Intel's chip manufacturing business, Intel Foundry Services, which is struggling with heavy losses, and experts believe it would continue to bleed cash at least through 2027. The foundry services incurred losses of $13 billion (£9.6 billion) in fiscal year 2024, higher than the $7 billion (£5.1 billion) in 2023. Those losses were among the top reasons that sent Intel's stock plunging 60% last year.

According to a Moor Insights & Strategy analyst, the deal not offering business to Intel Foundry services is a bit surprising. 'In fact, I was expecting that Nvidia was going to announce some sort of contract manufacturing deal with Intel, with the US government's involvement,' Anshel Sag said, adding that Nvidia also has an interest in diversifying its supply chain from TSMC.

Wall Street analysts are of the view that Intel's foundry business remains its biggest concern. Some believe the company should divest it, while others think that doing so would make it more expensive for Intel to manufacture its chips due to economies of scale.

During a press conference about the deal announcement yesterday, the CEOs of both Intel and Nvidia left open the possibility of Nvidia becoming a customer of Intel Foundry Services.

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