Nvidia to Buy $5 Billion Stake in Intel, Giving Rival a Lifeline

The deal between the chipmakers, whose fortunes have diverged sharply, includes plans to collaborate on technology to power artificial intelligence.

Nvidia, the world’s dominant maker of artificial intelligence chips, said on Thursday that it would invest $5 billion in its struggling rival, Intel, in a deal that illustrates how booming demand for A.I. is reshaping the global technology industry.

The deal is a lifeline for Intel and highlights a reversal of fortune between the two Silicon Valley companies. Once an industry leader, Intel has struggled to keep up with technology shifts to mobile devices and A.I. Last month, the Trump administration agreed to buy a roughly 10 percent stake in the company to bolster its shaky financial position.

Nvidia, by contrast, has become one of the world’s biggest and most geopolitically significant companies, producing the key chips needed for developing A.I. Jensen Huang, the company’s chief executive, is an industry superstar and joined President Trump in Britain this week for a state dinner at Windsor Castle.

The Trump administration approached Nvidia nine months ago and asked it to invest in Intel, said two people with knowledge of the conversations, who were not authorized to speak about private discussions.

Early this year, Howard Lutnick, who had been nominated to become Commerce secretary, proposed spinning off Intel’s struggling manufacturing business, the people said. He planned to turn its operations over to Intel’s rival, Taiwan Semiconductor Manufacturing Company, and have Nvidia, Apple and other major chip buyers invest in the new company and make their semiconductors.

On Thursday, Intel’s shares soared more than 25 percent to $31.79. Nvidia’s stock rose about 3 percent. The deal immediately increased the value of the U.S. government stake in Intel, which it purchased for $20.47 a share late last month.

The partnership between the two American chipmakers comes as China tries to become less dependent on U.S. chip technology and manufacture more semiconductors domestically. On Thursday, the Chinese technology giant Huawei said it was expanding A.I. chip development, a move that could challenge Nvidia.

As part of their deal, Nvidia and Intel said they would collaborate in developing chips for personal computers and data centers. Intel specializes in chips known as central processing units, that serve as the “brain” of a computer by coordinating different tasks across a machine. Nvidia makes other chips, known as graphics processing units, that are powerful for narrower tasks like crunching vast amounts of data.

The companies said that they would develop chips for personal computers and data centers using Intel’s PC-era chip technology, known as the x86 architecture, which could appeal to companies that need huge amounts of computing power for data centers or research.

“Together, we will expand our ecosystems and lay the foundation for the next era of computing,” Mr. Huang said in a statement.

Nvidia, which has a market value of more than $4 trillion, said it would buy about $5 billion of Intel’s common stock, a stake worth about 4 percent of the smaller company. It will pay $23.28 per share, a discount from Intel’s closing price on Wednesday. Based on Thursday’s stock gains, Nvidia has already profited from the deal.

“We appreciate the confidence Jensen and the Nvidia team have placed in us with their investment and look forward to the work ahead as we innovate for customers and grow our business,” Lip-Bu Tan, the chief executive of Intel, said in the statement.

Nvidia and Intel have headquarters about two miles apart on an expressway in Santa Clara, Calif. But their paths diverged in recent years.

Intel, founded in 1968, was long one of Silicon Valley’s most powerful and consequential companies. It designed and manufactured the semiconductors that were essential for machines running Microsoft Windows that helped popularize personal computers. The company lived by the maxim of a long-serving chief executive, Andy Grove: Only the paranoid survive.

But over the past two decades, Intel lost its way, cycling through chief executives and corporate strategies, while laying off thousands of employees. It missed the smartphone revolution after Apple’s introduction of the iPhone in 2007. And it has struggled to capitalize on demand for A.I. applications.

Nvidia has prospered. Once a niche developer of chips used for video game consoles, the company is at the center of the A.I. boom. Its chips are packed into data centers by the thousands and power chatbots and other A.I. applications for companies including OpenAI, Google and Microsoft.

The $5 billion investment in Intel doesn’t address the company’s most pressing business challenges, including not having its own artificial intelligence chip.

It also does not commit Nvidia to manufacturing chips at Intel factories. Intel poured billions of dollars into a plan to develop new production processes to challenge TSMC’s pre-eminence as the world’s leading chip producer. But it has struggled to develop the technology and failed to persuade Nvidia, Apple and others to buy chips from it.

Intel’s failure to get customers has forced it to delay the construction of a factory in Ohio, angering state and local politicians and raising questions about whether it should have received government funding to expand its manufacturing operations.

In August, the Trump administration’s deal for a roughly 10 percent stake in Intel’s business was made with money it had committed to give the company under the CHIPS and Science Act, a federal program signed into law in 2022 that delivered billions of dollars in grants to revive U.S. semiconductor manufacturing.

The investment included an incentive for the U.S. government to acquire 5 percent more of Intel at a discount if the company sells its majority ownership interest in its manufacturing business.

“Intel isn’t out of the woods yet,” said Patrick Moorhead, founder of Moor Insights & Strategy, a tech research firm. “They have a lot to prove.”

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