Nvidia Invests $5B in Rival Intel to Develop New Chips

Nvidia, the world’s leading manufacturer of AI chips, and the most valuable company in the world with a $4.2 trillion market cap, announced on Thursday that it will invest $5 billion in competitor Intel, which has a comparatively lower ($144.8 billion) market value. The investment gives Nvidia a 4% stake in Intel.

The deal requires that Nvidia and Intel work together to create chips for personal computers and data centers. Intel’s specialty is central processing units, or chips that act as the brain of a computer, handling different general-purpose tasks. Nvidia, on the other hand, focuses on making graphics processing units that can process large amounts of data for more specialized, intensive tasks like AI development, gaming, and video editing.

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The two companies are now joining forces to create chips that build on both areas of expertise. They intend to design chips that combine Nvidia’s AI strengths with Intel’s central processing power — “a fusion of two world-class platforms,” Nvidia CEO Jensen Huang said in a press release.

“Together, we will expand our ecosystems and lay the foundation for the next era of computing,” Huang stated in the release.

^{Nvidia CEO Jensen Huang. Photo by Johannes Neudecker/picture alliance via Getty Images}

Meanwhile, Wedbush researcher Dan Ives wrote in a note following the announcement that “this is a game-changer deal for Intel” that “brings them front and center into the AI game.”

Intel was once a significant player in the chip industry, but has struggled to adapt to shifting technologies like mobile devices and AI.

The chipmaker faced significant challenges, including three consecutive years of declining revenue and loss of market share to competitors, such as Nvidia and AMD. Nvidia captured between 70% and 95% of the AI chip market last year, compared to Intel’s less than 1%, per CNBC.

Intel has attempted to cut costs, announcing layoffs that affected 33,000 people earlier this year, reducing its workforce to 75,000 employees.

Related: Intel Requires Employees to Work From the Office More Often: ‘This Action Is Necessary’

In August, the U.S. government announced that it was taking a close to 10% stake in Intel, investing $8.9 billion for 433.3 million shares. At the time of writing, that stake is now worth $13.9 billion. Intel last month also agreed to a $2 billion investment from Japanese holding company SoftBank.

In the press release, Intel CEO Lip-Bu Tan said that the new partnership with Nvidia would “enable new breakthroughs for the industry.”

“We appreciate the confidence Jensen and the Nvidia team have placed in us with their investment,” Tan stated in the release.

Intel shares soared nearly 30% at Thursday’s market open following news of the Nvidia investment, while Nvidia stock rose about 3%.