Intel surges as Nvidia announces $5bn investment

(Sharecast News) - Intel shares surged on Thursday after Nvidia said it would invest $5bn in the chipmaker. Nvidia will make the investment in Intel's common stock at $23.28 per share.

The deal is part of a collaboration to jointly develop multiple generations of custom data centre and PC products "that accelerate applications and workloads across hyperscale, enterprise and consumer markets", Nvidia said.

The company's founder and chief executive Jensen Huang said: "AI is powering a new industrial revolution and reinventing every layer of the computing stack - from silicon to systems to software. At the heart of this reinvention is Nvidia's CUDA architecture.

"This historic collaboration tightly couples Nvidia's AI and accelerated computing stack with Intel's CPUs and the vast x86 ecosystem - a fusion of two world-class platforms. Together, we will expand our ecosystems and lay the foundation for the next era of computing."

At 1335 BST, Intel shares were up 29.5% at $32.11 in pre-market trade, while Nvidia was 2.9% higher at $175.21.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said the investment is less about money and more about influence.

"The deal deepens cooperation between two US chip giants, with Intel set to use Nvidia's GPU technology and Nvidia gaining a stronger foothold in domestic chip production," he said.

"For Intel, this is another welcome boost, both financially and strategically, as it leans on Nvidia to stay competitive. But even with the US government and Nvidia on side, it's one step short of a home run for the foundry business, which is struggling to attract the major customers it needs to succeed against the might of TSMC.

"For Nvidia, the financial impact is small, but the political upside is big: this move aligns with US policy and could help ease restrictions on selling advanced chips to China. It also signals a shift in industry dynamics, with Arm losing some exclusivity and AMD facing more pressure. In short, this is a strategic alliance with geopolitical undertones, not just a balance-sheet transaction."

Kathleen Brooks, research director at XTB, pointed out that his shot in arm from Nvidia to Intel comes after the US government took a 10% stake in Intel last month.

"The fall from grace for Intel has been rapid, up until 2022 its revenue growth was stronger than Nvidia's. The problem for the company is that it was slow to embrace the accelerator chip technology that has sent demand for Nvidia's chips surging. The fact that Nvidia is now giving cash injections to Intel is a sign of the re-shuffled hierarchy in Silicon Valley. It is also a sign of an accelerated push into PC AI, which could be a huge revenue stream for both companies.

"Even if Intel needs handouts from its peers in Silicon Valley, investors like it and the Intel share price is set to breach the highs of the year so far once US stocks open."