Nvidia Bets Big: $5 Billion Investment in Intel After U.S. Government Deal

After an unusual agreement with the US government for a 10% stake, Nvidia is now investing $5 billion in Intel. The company (Intel) has been on the radar of President Trump, who called for the resignation of the newly appointed CEO, Lip-Bu Tan, over his close ties with China. As a part of the new joint deal, Intel and Nvidia will co-develop data centers and PC chips. Following the announcement of the deal, Intel’s shares surged 30% in premarket trading, while Nvidia’s shares rose 3%.

Nvidia to invest $5 billion in chipmaker, Intel

This investment will make Nvidia one of the largest shareholders of Intel. This gives it around 4% or more of the company after the new shares are issued. Nvidia is investing its stake for $23.28 per Intel share. This price is slightly below the $24.90 per share as of closing on Wednesday. However, it’s higher than the $20.7 per Intel share that the United States government paid last month.

This new investment adds to the company’s reserve of capital. Recently, it announced a $2 billion investment from Softbank. Shortly after, it made a deal worth $5.7 billion with the US government. Last month, Intel’s chief financial officer, David Zisner, said that the company was in a “good cash position.” It could not require more capital until it saw a major demand for 14A, which is a next-gen manufacturing process.

The deal could pose a major challenge to the competition

As per the deal, Intel and Nvidia will jointly co-develop custom data center central processors that Nvidia will package with its AI chips- GPUs. The technology will enable Intel and Nvidia chips to communicate at higher speeds than before. These make a difference in the AI market, as many chips must be together to act as one to get through the loads of data.

Currently, Nvidia’s best-selling AI servers with the “speedy links” are only available using Nvidia’s own chips, but the deal will bring Intel into the picture. The combined Nvidia-Intel chips will be a major competition to AMD. The deal, subject to regulatory approvals, doesn’t seem to include the manufacturing of Nvidia chips with Intel’s foundry.

Details regarding a combined product or when it will it will hit the market are not out yet. But both companies have said that the product plans made before the joint deal won’t change.