Intel stock surges as Nvidia announces $5 billion stake in company

Intel (INTC) stock spiked roughly 25% at the market open on Thursday after leading AI chipmaker Nvidia (NVDA) said it will take a $5 billion stake in the struggling company.

Nvidia said Thursday in a press release that it will invest $5 billion in Intel’s common stock, pending regulatory approval. The news comes a month after the US government took a stake in Intel.

The two companies said that they would jointly develop “multiple generations of custom data center and PC [personal computer] products.” As part of that agreement, Intel will build custom CPUs [central processing units] with its x86 architecture, or traditional computer chips, for Nvidia to integrate into its AI servers used in data centers to power apps like ChatGPT.

Nvidia’s investment comes as Intel has struggled to catch up in the AI race. The company is the only large scale, leading chip manufacturer based in the US and is seen by some as vital to national security.

Earlier this year, the Trump administration was reportedly in talks with TSMC and Intel to split up the company and hand over Intel’s manufacturing business to its Taiwanese counterpart. While that deal never emerged, in an unusual move, the US government took a $8.9 billion, or 10% stake, in Intel in August.

Softbank (SFTBY) also took a $2 billion stake in Intel that month.

Intel designs chips for data centers and personal computers, and while it’s always manufactured its own semiconductors, it opened up that manufacturing business to outside customers in 2021 under former CEO Pat Gelsinger. Intel has aimed to both compete with Nvidia’s AI chips in its design segment and draw in customers such as Nvidia in its manufacturing business — but both efforts have fallen short.

CEO Lip Bu Tan, who stepped into his role in March, didn’t give many details about the company’s AI strategy in its most recent quarterly report — when the company announced it was laying off 15% of its workforce and shelved plans to build plants in Europe — but the latest partnership with Nvidia offers a potential glimpse into what his strategy could be: relying on its still-dominant CPU business to partner with AI chipmakers rather than taking them on directly.

“This is a game changer deal for Intel as it now brings them front and center into the AI game,” wrote Wedbush analyst Dan Ives in a note to investors Thursday.

Intel and Nvidia will host a press conference to discuss the news at 1 p.m. ET.

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