After an unusual agreement with the US government for a 10% stake, Nvidia is now investing $5 billion in Intel. The company (Intel) has been on the radar of President Trump, who called for the resignation of the newly appointed CEO, Lip-Bu Tan, over his close ties with China. As a part of the new joint deal, Intel and Nvidia will co-develop data centers and PC chips. Following the announcement of the deal, Intel’s shares surged 30% in premarket trading, while Nvidia’s shares rose 3%.
Nvidia to invest $5 billion in chipmaker, Intel
This investment will make Nvidia one of the largest shareholders of Intel. This gives it around 4% or more of the company after the new shares are issued. Nvidia is investing its stake for $23.28 per Intel share. This price is slightly below the $24.90 per share as of closing on Wednesday. However, it’s higher than the $20.7 per Intel share that the United States government paid last month.
This new investment adds to the company’s reserve of capital. Recently, it announced a $2 billion investment from Softbank. Shortly after, it made a deal worth $5.7 billion with the US government. Last month, Intel’s chief financial officer, David Zisner, said that the company was in a “good cash position.” It could not require more capital until it saw a major demand for 14A, which is a next-gen manufacturing process.
The deal could pose a major challenge to the competition
As per the deal, Intel and Nvidia will jointly co-develop custom data center central processors that Nvidia will package with its AI chips- GPUs. The technology will enable Intel and Nvidia chips to communicate at higher speeds than before. These make a difference in the AI market, as many chips must be together to act as one to get through the loads of data.
Currently, Nvidia’s best-selling AI servers with the “speedy links” are only available using Nvidia’s own chips, but the deal will bring Intel into the picture. The combined Nvidia-Intel chips will be a major competition to AMD. The deal, subject to regulatory approvals, doesn’t seem to include the manufacturing of Nvidia chips with Intel’s foundry.