Intel Stock Soars 23% After Nvidia Invests in Chip Maker. What’s In It for Nvidia?

Nvidia and Intel said they would collaborate on the development of custom data-center products. (Alexander Koerner/Getty Images)

Nvidia said Thursday it would invest $5 billion in Intel at a purchase price of $23.28 a share as part of an agreement that will see the technology companies co-develop “multiple generations of custom data center and PC products.”

Intel shares soared 23% to $30.57 following the announcement, while Nvidia rose 3.5%. The benchmark S&P 500 closed 0.5% higher. The move was Intel’s largest same-day percentage increase in nearly four decades, according to Dow Jones Market Data.

Under the terms of the partnership, Intel will build custom central processing units that Nvidia will integrate into its artificial-intelligence infrastructure platforms and offer to the market. Intel also plans to build circuits that integrate Nvidia hardware, which will then be used to power a range of personal computers.

Created with Highcharts 9.0.1Intel shares have risen 24% this year.Source: FactSetAs of Sept. 18

Created with Highcharts 9.0.12025Sept.17.520.022.525.027.530.0$32.5

On a call with members of the media Thursday afternoon, CEO Lip-Bu Tan said the company’s focus is to strengthen its balance sheet. “It’s a strategic partnership to drive the product and go to market to win,” he said.

In August, the Trump administration announced it was taking a 10% stake in Intel through an investment of $8.9 billion in the chip maker’s common stock, making the government Intel’s largest shareholder.

President Donald Trump called for Tan’s resignation in a social media post ahead of the deal. “There is no other solution to this problem,” Trump wrote earlier that month.

The Trump administration wasn’t involved in the Intel-Nvidia deal, an official told Barron’s.

While the stock has risen 57% this year, concerns linger around the company’s struggling foundry business. Intel noted in a filing with the Securities and Exchange Commission in July that it had been “unsuccessful to date in securing any significant external foundry customers.”

The Nvidia deal could offer a boost to Intel’s products division, which concerns the development and sale of chips for PCs and data centers. However, it won’t do much to resolve fundamental issues with the foundry.

On the call Thursday, Huang indicated Nvidia would continue using Taiwan Semiconductor Manufacturing as its primary foundry. “I think Lip-Bu and I would both say TSMC is a world-class foundry,” the CEO said. “In fact, we’re both very successful customers of TSMC’s.”

Tan added that the companies would decide whether Intel’s foundry could factor into the partnership at a later date.

TSMC’s American depository receipts rose 2%.

Nancy Tengler, CEO of Laffer Tengler Investments, a boutique investment management firm, said the Nvidia deal could be the first step in an acquisition or breakup of Intel among U.S. chip makers.

“It is entirely possible the company will remain a shadow of its former self but will survive,” Tengler added, likening Intel’s trajectory to that of Xerox.

Nvidia and Intel may be rivals in the chip-making space, but the companies previously worked together. In 2023, they announced a partnership centered on confidential computing for AI workloads.

The Trump administration struck a separate agreement with Nvidia and peer Advanced Micro Devices last month, with the companies agreeing to pay the government 15% of the revenue generated from selling AI chips to China. A report Wednesday suggested that China had banned its largest tech companies from purchasing Nvidia chips.

The partnership could help Intel better compete with AMD on the CPU side. As part of the agreement, Intel will produce Nvidia-custom x86 CPUs, as well as x86 system-on-chips that incorporate Nvidia RTX circuits.

AMD shares fell 2.4% on Thursday while fellow chip makers Broadcom and Qualcomm were flat and up 1.3%, respectively.

The agreement is a “game changer” for Intel, Wedbush analysts wrote Thursday, arguing that it brings Intel “front and center into the AI game.” Coupled with the recent federal involvement, “this has been a golden few weeks for Intel after years of pain and frustration for investors,” added the firm, led by analyst Dan Ives.

What Nvidia gets out of the deal is less clear. “Not really sure what INTC will offer back to NVDA in the DC (data center) side that materially helps NVDA vs what they have now, but I assume has to be CPU based systems,” Mizuho analyst Jordan Klein wrote.

He noted that Nvidia already uses the Grace CPU, an ARM-based processor, in its Blackwell systems. “Might not be a great first read for ARM,” Klein continued.

Huang said the announcement “should have no impact on ARM.” U.S.-listed shares of Arm Holdings declined 4.5% to $146.54.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com