Intel Stock Drops. Blame Nvidia.

Nvidia stock has been on a tear, rallying 7.5% in five days.

Key Points

• Intel’s stock fell 2.3% after reports that Nvidia abandoned plans to use Intel’s 18A chip production process.
• Nvidia’s decision not to proceed with Intel’s manufacturing process undermines hopes for Intel’s struggling chipmaking business.
• Nvidia had previously taken a $5 billion stake in Intel, which had initially boosted Intel’s stock by over 15%.

Intel stock was falling on Wednesday following a report that Nvidia had abandoned prospective plans to use the company’s chip production process.

It underscores one of Intel’s greatest weaknesses—and a nagging headwind for the stock price.

Shares of Intel retreated 2.3% in early trading during a holiday-shortened Christmas Eve session. Nvidia stock was down 0.8%, while the wider S&P 500 index were just above flat.

Nvidia recently tested whether it would manufacture its chips using Intel’s production process but stopped moving forward with plans, Reuters reported early Wednesday, citing two anonymous sources.

The news is likely to blame for Intel stock weakness. Shares of the company previously got a boost from news that Nvidia as well as Broadcom were testing its production process, known as 18A.

Nvidia and Intel did not respond to a request for comment.

Nvidia took a $5 billion stake in Intel in September—following the U.S. government’s own $10 billion investment in the company —raising hopes of a renaissance for one of the U.S. chip industry’s pioneers.

Investors had hoped that a closer relationship between Intel and Nvidia would help address one of the key problems facing Intel: its struggling manufacturing business. Issues with manufacturing technology have been a significant factor behind the company falling behind rivals, namely Taiwan Semiconductor Manufacturing.

The report that Nvidia is not moving ahead with using Intel’s 18A process is far from a vote of confidence in the company’s manufacturing.

While Intel shares have gained more than 15% since Nvidia’s investment in the company, the stock has recently languished, with its price falling less than 1% over the past month.

Despite stalling early Wednesday, Nvidia stock has been on a tear, rallying 7.5% in five days, including amid signs that demand for chips from China is picking up.

If the wider stock market is going to have a Santa Claus rally—the tendency for equities to rise through the end of the year— investors could be looking to Nvidia, one of the year’s market darlings.