Intel's stock skyrockets by 29% following Nvidia's commitment to inject $5 billion into Intel's semiconductor competitor
In a historic move, Intel and Nvidia have announced a partnership to develop advanced chips for PCs and data centers. This collaboration, described by Nvidia's CEO Jensen Huang as a "fusion of two world-class platforms," aims to leverage Intel's processor technology and manufacturing capabilities with Nvidia's expertise in chip communication and performance.
As part of the deal, Nvidia has agreed to invest $5 billion in Intel, purchasing $5 billion worth of Intel stock at $23.28 per share. This investment has led to a significant surge in Intel's shares, with premarket trading seeing a 29% increase, pushing the share price up to $31.97 - its highest level since July last year.
Nvidia's own shares also experienced a 3% rise following the announcement. However, shares in Arm, Nvidia's current CPU partner, decreased by 5% in premarket trading.
The partnership between Intel and Nvidia is focused on the AI server market, where the combination of Nvidia's graphics processing units and Intel's general-purpose chips is expected to deliver enhanced performance and efficiency. Intel will also be building custom central processing units for Nvidia to incorporate into its AI platforms for data centers.
Interestingly, the deal does not mention Nvidia using Intel's foundry to produce its chips. This could suggest that the partnership is primarily focused on chip design and development, rather than manufacturing.
The partnership between these two Silicon Valley giants, long-standing competitors, comes a month after the US government agreed to take a 10% stake in Intel. It also follows an investment of $2 billion worth of Intel shares by Japan-based SoftBank, Arm's majority owner, last month.
Intel's chipmaking business has reportedly been struggling, with losses reported in billions. The company has also been facing challenges in securing external customers for its manufacturing operations. The investment from Nvidia could provide a much-needed boost for Intel in this regard.
Intel's CEO, Lip-Bu Tan, expressed appreciation for the investment from Nvidia, describing it as a "significant vote of confidence" in Intel's technology and manufacturing capabilities. The deal was announced on Thursday and marks a new chapter in the competitive landscape of the semiconductor industry.
