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Intel Shares Riding High on Nvidia Partnership and US$5B Investment

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By Eason Pan/Chris Gorin

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Intel shares were up more than 22% on news of its new partnership with Nvidia. The companies say it’s a product partnership, not a chipmaking agreement, thought it remains to be seen what it could mean for Taiwan’s TSMC.

NVIDIA and Intel Announce $5 Billion Partnership

 

CHRIS GORIN:  

A surprise deal among former rivals. US chip giants Nvidia and Intel have announced a partnership.

 

Nvidia will invest 5 billion US dollars in Intel, and the pair are working on new products for PCs and data centers.

 

But the deal does not include any foundry agreements for manufacturing Nvidia chips in Intel’s chip factories.

 

Stacy Rasgon (MANAGING DIRECTOR AND SENIOR ANALYST, BERNSTEIN RESEARCH):  

a lot of folks were expecting to see more like foundry deals, you know, because I mean, the big push has really been around manufacturing. And this is not a foundry deal. This is a product deal, which I think for Intel is fine because frankly, their product business needs a lot of help too.

 

CHRIS GORIN:  

The new products include a system-on-chip for consumer PCs, combining Intel’s CPUs with Nvidia’s GPUs.

 

Nvidia will also buy Intel CPUs for use in its data center rack systems.

 

Investors were excited with Intel’s stock ending up more than 22 percent on Thursday. Nvidia was also up nearly 3.5 percent.

 

It’s a big boost for Intel, which has struggled for years but recently drew in lots of fresh money. That includes a stake from the US government, which is pushing to expand high-tech manufacturing at home.

 

Between the investments from Washington, Japanese conglomerate Softbank, and now Nvidia, Intel has seen about 16 billion dollars in new investments in just the last month.

 

But it also raises questions about Nvidia’s other partners, like Intel foundry rival TSMC, Taiwan’s largest company. Both Intel and Nvidia are TSMC customers, and Nvidia is one of its largest.

 

But the CEOs of both Intel and Nvidia publicly praised TSMC and stressed there is no foundry agreement in this partnership.

 

Ray Wang (LEAD SEMICONDUCTOR ANALYST, FUTURUM GROUP):  

if I'm TSMC investors, I think I shouldn't be worried too much on this.

 

Ray Wang (LEAD SEMICONDUCTOR ANALYST, FUTURUM GROUP):  

the broader trend is more sort of I will pay close attention to its US determination in pursuing US semiconductor supply chain or advanced semiconductor manufacturing. I think on that front, it's very clear, and I think it's actually realized by many investors and people in the market.

 

CHRIS GORIN:  

And despite the extra investment and US government backing, Intel may still face challenges.

 

Stacy Rasgon (MANAGING DIRECTOR AND SENIOR ANALYST, BERNSTEIN RESEARCH):  

US based semiconductor manufacturing and and design is important, and there are very few companies that can do leading edge manufacturing. And of the three, even in theory, Intel is the only one that that's us based.

 

Stacy Rasgon (MANAGING DIRECTOR AND SENIOR ANALYST, BERNSTEIN RESEARCH):  

Now, in terms of making them successful, the money doesn't really do that, right. Intel has to do that on their own. I think the jury is still out on that.

 

CHRIS GORIN:  

The deal is a major one, but its impacts on the overall chip industry may not be seen for some time to come.