Nvidia Bets $7.5 Billion on Intel in Unexpected Alliance

Nvidia has shocked the tech industry with a US$5 billion ($7.5 billion) investment in Intel.

The move creates an alliance between two fierce rivals, focused on building new chips for PCs and data centres.

The deal triggered a 23% surge in Intel’s share price, its sharpest one-day gain since 1987. It also boosted the US government’s 10 per cent Intel stake, taken in August, to nearly US$14 billion ($21.1 billion).

Nvidia is buying Intel shares at US$23.28 ($35.10) each, taking a stake of less than 5 per cent.

More importantly, Intel will integrate Nvidia graphics into upcoming PC processors. It will also design custom x86 CPUs to power Nvidia’s data-centre servers.

In return, Nvidia will become a major buyer of Intel CPUs.

That marks a first for the world’s most valuable chipmaker, which has relied on Arm-based processors for its servers until now.

“This is historic,” said Nvidia CEO Jensen Huang on a webcast with Intel chief Lip-Bu Tan. “We’re taking the next great step.”

Tan said the tie-up strengthens Intel’s balance sheet and broadens its product reach after years of decline.

Both leaders insisted Washington did not orchestrate the deal.

But the politics are impossible to ignore. The US Commerce Department is Intel’s biggest shareholder. Nvidia also has a revenue-sharing agreement with the Trump administration on China sales.

Analysts say the deal lines up neatly with Trump’s push to revive American chipmaking, even if the companies stress commercial motives.

For Nvidia, the pact targets markets where AMD has gained the upper hand.

Huang revealed plans for a fused system-on-chip combining Intel CPUs and Nvidia RTX GPUs. The goal is to serve laptops and handhelds, a segment AMD dominates with its new Strix Halo chip.

Nvidia also gains an x86 option for servers. That complements its existing Arm-based Grace processors and could help claw back ground in a market where AMD’s share is nearing 40 per cent.

Both Huang and Tan have been clear that their deal won’t shift Nvidia’s heavy reliance on Taiwan’s TSMC for manufacturing.

While Intel’s advanced packaging technology may be used, both companies said it’s too early to say whether Nvidia will actually fabricate chips in Intel’s factories.

Optimists hailed the deal as a potential turning point for Intel.

Wedbush Securities’ Dan Ives called it “a golden few weeks for Intel after years of pain and frustration” and argued the Nvidia alliance could restore investor faith in a company long seen as lagging in AI.

Sceptics were less convinced.

Wolfe Research questioned whether the partnership is “token cooperation intended for political purposes, or the start of a wider collaboration that would more significantly benefit Intel” and noted Nvidia’s continued reliance on TSMC and its AI dominance.

Others flagged political risk.

“It is perhaps unprecedented that a company with a unique revenue-sharing agreement with the U.S. government is investing so much money in a company that’s partially owned by the U.S. government,” said Ryan Fedasiuk, a prominent academic and US policy analyst.

For Intel, once a Silicon Valley behemoth, survival may now depend on cooperation with the rival that has surpassed it and which is currently the world’s most valuable company.