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In a surprising move that's shaking up the tech world, NVIDIA CEO Jensen Huang is speaking out about his company's massive $5 billion investment in rival chipmaker Intel. Nvidia

NVIDIA CEO Jensen Huang is setting the record straight on a recent headline-grabbing move. In a surprising twist, he's revealing the real story behind the company's massive investment in Intel, and it's likely not what you'd expect.

In a major show of confidence in Intel's comeback, NVIDIA is investing $5 billion (£3.70 billion) in its fellow chipmaker. For years, Intel has seen its market share and revenues shrink, even with the US government's help in constructing new chip factories.

A Powerful Partnership

On Thursday, however, the company received arguably the most powerful stamp of approval in the semiconductor industry: an endorsement from NVIDIA CEO Jensen Huang. 'We're delighted to have invested in Intel, and the return on that investment is going to be fantastic', the top executive told reporters at a press conference on Thursday.

As part of this new alliance, Intel will integrate NVIDIA's graphics processing unit (GPU) technology, which powers AI applications, into upcoming AI PC products. For its data centres, NVIDIA will begin using Intel's x86 central processing units (CPUs) — the conventional computer chips that support more advanced AI processors — as part of a new collaboration.

'We're going to become a very large customer of Intel CPUs', Huang said. Meanwhile, Intel's stock had risen by about 23% by Thursday's closing bell. This partnership comes just weeks after the Trump administration took a significant stake in Intel, signalling its support for the company.

An Unexpected Endorsement

In early August, US President Donald Trump called for the immediate departure of Intel CEO Lip-Bu Tan, claiming his Chinese investments presented a conflict of interest. Yet, after a subsequent meeting with Tan, Trump quickly reversed course.

Investment announcements started to come in quickly. In early August, SoftBank announced a $2 billion (£1.48 billion) stock investment in Intel. Just a few weeks later, Trump revealed the US government would be acquiring a 9.9% stake in the company. This move has puzzled some business leaders while also drawing both praise and criticism from politicians.

The relationship between Trump and NVIDIA's Huang has grown closer. The two were in the UK on Wednesday when Huang announced a major AI data centre project that coincided with the President's state visit. Some also see political advantages for NVIDIA in the Intel agreement, per Business Insider.

'Partnering with a US-backed Intel strengthens Nvidia's alignment with Washington's industrial policy, potentially reducing scrutiny around its China exposure', wrote Brad Gastwirth, the global head of research at Circular Technology.

On Thursday, Huang declared the administration played no part in the deal, even though it was supportive. Bernstein estimates that with NVIDIA's investment, the company will own approximately 4% of Intel. These three deals are expected to provide Intel with $16 billion (£11.85 billion) in cash.

'Having Jensen's blessing is priceless', the Bernstein senior analyst Stacy Rasgon wrote in a note to investors.

What the Investment Entails

At Thursday's event, Tan said the new partnership will combine the 'core strengths' of both companies.

Huang's investment in Intel gives NVIDIA a way to enter the personal computer market. The company currently focuses on the desktop GPU market, which is widely used for gaming, graphics and scientific work.

NVIDIA has traditionally purchased CPUs from AMD and ARM. Upon hearing the news, AMD's stock saw a moderate drop, as the company is a direct competitor to Intel in both the data centre and consumer PC markets.

According to Huang, ARM's business would not be impacted. However, Wall Street analysts have suggested that ARM could see a small dip in market share, while AMD's potential loss might be slightly larger, although still likely gradual.

Thursday's announcement did not include any updates regarding Intel's foundry business, a significant and expensive venture to produce chips for other companies within the country. During the press conference on Thursday, both executives avoided numerous questions about the possibility of NVIDIA becoming a foundry customer for Intel.

'We've always evaluated Intel's foundry technology, and we're going to continue to do that. But today, this announcement is squarely focused on these custom CPUs,' Huang said. Meanwhile, Bernstein analysts wrote that the $5 billion (£3.70 billion) investment won't resolve Intel's difficulties with its foundry business.

'The root cause of Intel's issue is its small scale, high cost, and poor execution of Intel Foundry', the Bernstein analysts wrote.

Analyst Consensus

Gastwirth said NVIDIA could benefit from having more influence over the design of future Intel products as AI becomes a key part of personal computers. Rasgon noted that the NVIDIA deal could alter the perception of Intel, a company that has experienced declining product sales and undergone ongoing layoffs for years.

'We note that no timeline has been given for future product roadmaps, however', Rasgon wrote, adding that it would most likely take 'several years'.

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