In a significant move that underscores the transformative power of artificial intelligence, Nvidia, the global leader in AI chips, announced Thursday a $5 billion investment in its struggling competitor, Intel. This deal vividly illustrates how the surging demand for AI technology is fundamentally reshaping the tech industry worldwide.
For Intel, this investment is a much-needed lifeline. It marks a dramatic role reversal for the two Silicon Valley giants. Intel, once a titan of the industry, has faltered in adapting to the rise of mobile computing and AI. Just last month, the Trump administration stepped in, acquiring roughly a 10 percent stake in the company to stabilize its financial standing.
Nvidia, on the other hand, has soared to become one of the world’s largest and most strategically vital companies, thanks to its indispensable chips for AI development. Its CEO, Jensen Huang, is now a celebrated figure in the tech world, recently accompanying President Trump to a state dinner at Windsor Castle in Britain.
Sources familiar with the discussions, who requested anonymity due to the private nature of the talks, revealed that the Trump administration first approached Nvidia about investing in Intel nine months prior.
Earlier this year, Howard Lutnick, then nominated as Commerce secretary, reportedly floated the idea of spinning off Intel’s troubled manufacturing arm. The plan, according to insiders, involved transferring these operations to Intel’s primary rival, Taiwan Semiconductor Manufacturing Company, with Nvidia, Apple, and other major chip manufacturers then investing in the new entity to produce their semiconductors.
Following the announcement, Intel’s shares surged by over 25 percent, closing at $31.79. Nvidia’s stock also saw a rise of approximately 3 percent, meaning Nvidia has already seen a profit from its investment, which boosted the value of the U.S. government’s earlier stake in Intel, purchased at $20.47 per share.
This alliance between the two American chipmakers unfolds as China intensifies its efforts to reduce reliance on U.S. chip technology and boost domestic semiconductor production. Coincidentally, on Thursday, Chinese tech giant Huawei declared its expanded focus on AI chip development, a move that could pose a direct challenge to Nvidia’s market dominance.
A core component of the agreement involves Nvidia and Intel collaborating on chip development for personal computers and data centers. Intel excels in central processing units (CPUs), the “brain” of computers that orchestrate various tasks. Nvidia, conversely, specializes in graphics processing units (GPUs), which are exceptionally powerful for demanding tasks like processing massive datasets, crucial for AI.
The companies further stated their intention to develop PC and data center chips utilizing Intel’s established x86 architecture, a strategy expected to attract businesses requiring extensive computing power for large data centers and advanced research initiatives.
“Together, we will expand our ecosystems and lay the foundation for the next era of computing,” remarked Mr. Huang in a public statement.
Nvidia, boasting a market capitalization exceeding $4 trillion, confirmed it would acquire approximately $5 billion worth of Intel’s common stock, equating to about a 4 percent share in the smaller company. The purchase price of $23.28 per share was notably a discount from Intel’s Wednesday closing price, highlighting Nvidia’s shrewd financial positioning.
Lip-Bu Tan, Intel’s CEO, expressed gratitude for the investment, stating, “We appreciate the confidence Jensen and the Nvidia team have placed in us with their investment and look forward to the work ahead as we innovate for customers and grow our business.”
Despite their proximity in Santa Clara, California, with headquarters just two miles apart, Nvidia and Intel have followed vastly different trajectories in recent years.
Founded in 1968, Intel once reigned as one of Silicon Valley’s most influential companies, designing and manufacturing the semiconductors vital for Microsoft Windows-powered personal computers. Its culture was famously shaped by former CEO Andy Grove’s adage: “Only the paranoid survive.”
However, over the past two decades, Intel lost its strategic direction, experiencing frequent leadership changes and significant layoffs. It failed to adapt to the smartphone era, missing the opportunity presented by Apple’s iPhone in 2007, and has struggled to capitalize on the explosive demand for AI applications.
Nvidia, meanwhile, has flourished. Once known primarily for chips in video game consoles, it now stands at the forefront of the AI revolution. Thousands of its chips are deployed in data centers, powering advanced AI applications and chatbots for tech giants like OpenAI, Google, and Microsoft.
Critically, this $5 billion investment does not resolve Intel’s most pressing challenges, particularly its lack of a proprietary artificial intelligence chip.
Furthermore, the deal does not obligate Nvidia to manufacture chips at Intel’s facilities. Intel had invested billions into ambitious plans to develop advanced production processes to rival Taiwan Semiconductor Manufacturing Company. However, these efforts have been plagued by technological hurdles, and Intel has failed to attract key customers like Nvidia and Apple to its manufacturing services.
Intel’s inability to secure customers led to the delay of a new factory in Ohio, drawing criticism from state and local politicians and raising questions about the allocation of government funding intended to boost U.S. semiconductor manufacturing.
The Trump administration’s August deal, which secured a roughly 10 percent stake in Intel, utilized funds from the 2022 CHIPS and Science Act. This federal program was designed to inject billions into revitalizing domestic semiconductor production.
This government investment also included a clause: the U.S. government could acquire an additional 5 percent of Intel at a reduced price if the company divests its majority ownership in its manufacturing division.
“Intel isn’t out of the woods yet,” observed Patrick Moorhead, founder of Moor Insights & Strategy, a prominent tech research firm. “They have a lot to prove.”