Nvidia Announces $5 Billion Investment in Competitor Intel
Nvidia Invests $5 Billion in Intel, Boosting Nvidia Stock and DJIA
In a strategic move, Nvidia announced a $5 billion investment in Intel on September 18, 2021, potentially reshaping the chip industry and boosting Nvidia stock. This investment, which could pose a threat to Taiwan's TSMC and AMD, comes after the US government took a significant stake in Intel.
The financial details of the technical collaboration were not disclosed, but the companies plan to develop "multiple generations" of future products. The collaboration is described as a commercial arrangement, with no licensing component.
The investment makes Nvidia one of Intel's largest shareholders, owning roughly 4% or more of the company. Intel and Nvidia will collaborate to design custom data center central processors and AI chips, potentially expanding Nvidia's market share in China.
The investment price is slightly below Intel's closing share price on the previous day but higher than the price paid by the US government for its stake. The CEO of Intel who announced the partnership with Nvidia is Lip-Bu Tan. Tan, who was appointed as the CEO in March 2021, faced criticism from US elected officials, including President Trump, due to concerns about his connections with China.
The political upside of the move is significant, as the investment aligns with US policy and could help ease restrictions on selling advanced chips to China. The collaboration could provide a major competitive challenge to AMD and Broadcom in the AI market.
Nvidia, in recent years, has entered both the PC central processor market and the data center central processor market. The combination of Nvidia's AI and accelerated computing stack with Intel's CPUs could expand their ecosystems and lay the foundation for the next era of computing.
The Apollo Lake chip, a proprietary Nvidia technology, will allow Intel and Nvidia chips to communicate at higher speeds than before. This collaboration could potentially revolutionize the chip industry, with significant implications for the global tech landscape.
The investment triggered a 30% jump in Intel's shares in premarket action. However, the full impact of this collaboration on the chip industry and the tech market as a whole remains to be seen.
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