The deal follows an announcement of major federal investment in Intel.
Struggling Intel will sell a $5 billion — or 4% — stake to its ascendant rival NVIDIA in a deal expected to yield new products and possibly bolster both companies.
Intel stocks soared 23% following the announcement Friday — one of the struggling chipmaker’s best days on Wall Street in years, according to the Wall Street Journal.
Both companies are based in California’s Silicon Valley with a presence in Oregon. Intel is the state’s largest private employer, with 18,000 workers primarily in Hillsboro. NVIDIA, founded by an alumnus of Aloha High School and Oregon State University, has two sites in Beaverton where it employs around 100 people. The deal has reportedly been in the works since the second half of last year.
Under the deal, Intel will design custom central processing units, or CPUs, that will be easily integrated with NVIDIA’s chips and other equipment in both data centers and personal computers, WSJ reported.
NVIDIA is the leading AI chip maker that recently made headlines as the world’s first $4 trillion company. Intel, whose chips powered the personal computing revolution of the 1990s, has stumbled of late. One commonly cited misstep for the once-mighty chipmaker is that it has largely missed the boat on the AI boom. But Intel remains the only major American company that designs and manufactures the most powerful chips like those used in AI computing, according to WSJ. And it’s one of only two producers of X86 processors, used in most non-Apple personal computers and other devices.
The deal comes several weeks after the White House announced an unprecedented deal to take an ownership stake in Intel. Trump’s first move was to question new Intel CEO Lip-Bu Tan’s national loyalty and call for his ouster in a social media post.
In response, Tan, who’s attempting to pull off a major turnaround, flew to Washington D.C. to meet with Trump. Days later the White House announced the Commerce Department would take a 10% stake in Intel. The deal converted nearly $9 billion in promised grants from the 2022 Chips and Science Act, an initiative of the Biden Administration to return chip manufacturing to the U.S.
Last month, Tan secured a $2 billion investment from SoftBank Group. He’s also laid off 15% of the company’s global workforce.
With the deal, NVIDIA may be attempting to deepen its product line by investing in a customer, or to curry political favor with the president, wrote Sherwood News. The company has made similar investments up and down its supply chain with Applied Digital, Arm Holdings, CoreWeave and Nebius Group. For Intel, it gives the company a stronger position in the booming data center sector, where Intel’s X86 architecture is preferred by some customers. And the deal is thought to give Nvidia a stronger position in the PC market among other benefits.
Some cheered the news as a rare bright spot for an embattled Intel. NVIDIA CEO Jensen Huang called the deal “historic.”
“We’re taking the next great step,” Huang said. “We’re essentially going to be a major customer of Intel’s server CPUs. This is the first time.”
But not everyone is optimistic about the partnership. Intel lost $3 billion in the second quarter of the year and the deal doesn’t address the business segment that’s caused Intel the most trouble in recent years: its contract chip fabrication, Intel Foundry Services. An effort to build chips for other companies, the foundry was a major initiative of Tan’s predecessor as CEO, Pat Gelsinger. But the division has struggled to find customers and maintain leading-edge manufacturing processes.
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