AsianFin -- Intel Corporation stock on Thursday logged its best day in nearly 38 years after Nvidia Corporation announced billions of dollars of investment in the beleaguered chipmaker and a new partnership on chip development.
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Shares of Intel jumped as much as 30% and settled around 22.8% higher to $30.57, notching their largest largest one-day gain since October 29, 1987. Nvidia, the world’s most valuable listed company, saw its shares rose 3.5%, driving three major U.S. indexes to their record-high close on Thursday. The S&P 100 climbed 0.5% to finish at 6,631.90, the Nasdaq Composite advanced 0.94% to 22,470.73, and the Dow Jones Industrial Average added 0.27% to close at 46,142.42.
Nvidia earlier Thursday said it will invest $5 billion in Intel’s common stock at price of $23.28 apiece, representing a 6.5% discount to Intel shares close on Wednesday. The deal will enable Nvidia to own a 4% stake in Intel. The investment is subject to customary closing conditions, including required regulatory approvals, said the artificial intelligence (AI) chip giant in a statement.
Nvidia and Intel will also jointly develop multiple generations of custom data center and personal computer (PC) products, focusing on connecting both companies’ architectures using Nvidia NVLink, the high-speed interconnect for graphics processing unit (GPU) and central processing unit (CPU) processors in accelerated systems.
For data centers, Intel will build Nvidia-custom x86 CPUs that Nvidia will integrate into its AI infrastructure platforms and offer to the market. For personal computing, Intel will build and deliver x86 system-on-chips (SOCs) that integrate Nvidia RTX GPU chiplets. These new x86 RTX SOCs will power a wide range of PCs that demand integration of world-class CPUs and GPUs.
“This historic collaboration tightly couples Nvida’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,” Nvidia CEO Jensen Huang said in the statement.
The deal is deemed as not just a win for Intel but a victory for Nvidia. For Intel, the collaboration stands to give the coompany a bigger foothold in the booming data center business driven by AI frenzy. It could help slow its market-share erosion in the server CPU business, according to Mizuho research analyst Vijay Rakesh.
Given Intel’s strength in the PC business, Nvidia may also view a partnership with Intel as an opportunity to better compete in that market," Ray Wang, lead semiconductor analyst at The Futurum Group. The partnership will also provide Nvidia a more seamless shift into edge computing, where AI companies can use its chips to develop software using desktop work stations and other devices, instead of having to connect to the cloud to access computing power.
But Futurum’s Wang noted that the announcement does not mention Intel Foundry Services, which to him suggests the collaboration is focused only in the data-center and client businesses for now. "More importantly, as Intel is navigating the 'AI story' for the firm's culture, the deal with Nvidia is at minimum positive news the management and investors of Intel would love to see," Wang commented.
The stock surge on Thursday also made the U.S. government a big winner. Intel on August 22 said it agreed to give a nearly 10% stake to the Trump administration in exchange for a total of $11.1 billion funding under the CHIPS and Science Act of 2022 (CHIPS Act)
On top of the $2.2 billion in CHIPS Act grants Intel has already received, the U.S. government under its agreement with Intel agreed to make an $8.9 billion investment in Intel common stock at $20.47 per share. The equity stake was funded by the $5.7 billion in unpaid CHIPS Act grants previously awarded and $3.2 billion awarded to the company as part of the Secure Enclave program.
As of Thursday close, the government has an nearly 50% gain given its purchase price, representing paper gains of about $4.4 billion on the Intel stock purchase. Its roughly $90 billion stake now is worth more than $13 billion.
