Nvidia to become one of Intel’s biggest shareholders with new investment

Nvidia hasn’t yet made a significant investment in Intel, despite promising to do so in support of the struggling US chipmaker.

Nvidia, headquartered in Santa Clara, California, made the announcement on Thursday.

Taiwan’s TSMC could face a potential risk as a result of the agreement, which also includes a strategy for Intel and Nvidia to work together on developing personal computers and data center chips. The world’s most valuable company could one day expand its manufacturing footprint to Intel by producing Nvidia’s flagship processors. Due to Nvidia’s support for AMD, which competes with Intel for chips to data centers, also has a chance to lose.

Nvidia announced in a statement that it will pay $ 23.28 per share for Intel common stock, slightly below the $ 24.90 closing price of Intel stock on Wednesday.

This is a remarkable development over the $20.47 per share that the US government paid for Intel last month.

The White House has denied being involved in the agreement, which comes just one day after Donald Trump’s meeting with Nvidia’s Jensen Huang on Wednesday.

New doors open

Nvidia’s most recent investment will make it one of Intel’s largest shareholders, with a potential ownership of 4% or more of the business once new shares are issued to close the deal.

After years of unsuccessful attempts to turnaround, Intel is now open to new opportunities with Nvidia.

Lip-Bu Tan, the head of Intel, was appointed in March as the company’s flagbearer, who claimed to have put the “silicon” in Silicon Valley. Tan has promised to keep the Intel business running smoothly and only build factories when demand is right.

Crucially, the agreement won’t involve Intel’s contract manufacturing company, which produces chips for Nvidia, a “foundry” in the chip industry. According to the majority of analysts, Intel’s foundry would need to eventually win a sizable customer, such as Nvidia, Apple, Qualcomm, or Broadcom.

The deal strengthens Intel’s growing reserve of capital, which it has accumulated weeks after making its $ 2 billion investment from Softbank and $ 5 billion from the US government.

At a Deutsche Bank conference last month, David Zinsner, the company’s chief financial officer, stated to investors that the company was in a “good cash position” and wouldn’t need much more money until there was “significant demand” for 14A, a next-generation manufacturing process that it expects to invest a lot of money in building.

Nvidia will include custom data centers central processors with its AI chips, known as GPUs, in accordance with the deal that was made Thursday. The Intel and Nvidia chips will be able to communicate more quickly thanks to a proprietary Nvidia technology.

Because many chips must be strung together as one to eat through a lot of data, those quick links are a key difference maker in the AI market.

The deal would now give Intel a chance to profit from each Nvidia server, despite the fact that Nvidia’s best-selling AI servers with those speedy links are currently only accessible using Nvidia’s own chips.