Nvidia announced a $5 billion investment in Intel on Thursday, showing support for the struggling U.S. chipmaker following a recent deal with the U.S. government. This investment will make Nvidia one of Intel’s top shareholders, owning around four percent of the company post-deal completion.
The move by Nvidia breathes new life into Intel, which has faced challenges despite past turnaround efforts. The appointment of CEO Lip-Bu Tan earlier this year was met with scrutiny, including calls for resignation from U.S. officials over concerns about ties to China. Subsequently, an arrangement was made for the U.S. government to acquire a 10 percent stake in Intel.
Nvidia’s investment in Intel involves purchasing common stock at $23.28 per share, slightly below the previous day’s closing price. This move aims to diversify Nvidia’s U.S. investments and align with the U.S. government’s interests.
The collaboration between Intel and Nvidia will focus on developing PC and data center chips, enhancing communication speeds between their processors. This partnership is crucial for Intel’s foundry business, as securing significant customers like Nvidia is essential for its survival. The deal aims to position Intel competitively against industry players like AMD and Broadcom in the AI server market.
The financial details of the technical collaboration between Intel and Nvidia remain undisclosed. However, the collaboration is expected to yield multiple future product generations. This strategic move is likely to align with U.S. policies and could potentially ease restrictions on advanced chip sales to China.
The deal adds to Intel’s recent capital inflow, including investments from Softbank and the U.S. government. Meanwhile, Nvidia faces challenges in selling its H20 chips in China due to geopolitical tensions, with China recently banning its companies from acquiring Nvidia’s AI chips to bolster its domestic chip industry.