Intel spikes on Nvidia’s $5 billion investment plan

The chipmaker Intel has successfully hitched its wagon to the biggest star in the semiconductor space: Nvidia. In a joint press release, the two companies announced “a collaboration to jointly develop multiple generations of custom data center and PC products that accelerate applications and workloads across hyperscale, enterprise and consumer markets” — and it will also see Nvidia purchase $5 billion in Intel stock at a price of $23.28 per share.

Traders loved it. Intel finished the day up 22%. Heck, the market as a whole loved it; as you saw up top, pretty much everything finished green across the board yesterday.

Intel and Nvidia plan to codesign two products: first, custom-made CPUs for data centers that Nvidia would integrate into its AI infrastructure platforms, and second, system-on-chips for PCs that integrate Nvidia’s RTX GPUs for better performance.

In AI data centers, Nvidia GPUs — the processing units the company is best known for — are often used in combination with Intel’s CPU chips, so if Nvidia can collaborate on making custom Intel chips using Intel’s proprietary x86 architecture, it might improve the overall performance of Nvidia’s AI systems.

Also, the collaboration could mean the superfast connections Nvidia has developed to link up its GPUs (called NVLink) might start to be used more with Intel CPUs, which hasn’t been typical so far.

The deal seems primarily focused on developing new semiconductor products that should improve Intel’s access to the fast-growing AI market, rather than on making Nvidia a customer for Intel’s troubled contract manufacturing business, or “foundry,” where it produces chips for others.

The Takeaway

As Wedbush Securities put it, “This is a game changer deal for Intel as it now brings them front and center into the AI game. Along with the recent US Government investment for 10% this has been a golden few weeks for Intel after years of pain and frustration for investors.”