Nvidia said on Thursday it would invest $5 billion in Intel, throwing its heft behind the struggling U.S. chipmaker just weeks after the White House engineered an extraordinary deal for the federal government to take a massive stake in the company.
The stake will instantly make Nvidia one of Intel's largest shareholders, giving it roughly 4% of the company after new shares are issued to complete the deal. Nvidia's support represents a new opening for Intel after years of turnaround efforts failed to pay off, and it triggered a jump in the U.S. manufacturer's shares.
The company – once the chip industry's flag bearer that claimed to put the "silicon" in Silicon Valley – appointed a new CEO, Lip-Bu Tan, in March. He quickly came under fire from U.S. elected officials, including President Donald Trump, who called for him to resign due to concerns about his connections with China. That led to a swiftly arranged meeting in Washington that ended with Intel's unusual arrangement to give the U.S. a 10% stake in the company.
The new pact includes a plan for Intel and Nvidia to jointly develop PC and data center chips, but crucially will not involve Intel's contract manufacturing business, known as a "foundry" in the chip industry, making chips for Nvidia. Most analysts believe that for Intel's foundry to survive, it would need to win a large customer such as Nvidia, Apple , Qualcomm or Broadcom .
Nvidia, whose must-have chips are powering a global artificial intelligence boom, said it would pay $23.28 per share for Intel common stock, slightly below the $24.90 Wednesday closing price but higher than the $20.47 price the U.S. government paid.
The companies did not disclose the financial terms of their collaboration but said they would make "multiple generations" of future products. Nvidia and Intel officials described the collaboration as a commercial arrangement under which they will provide chips to one another to create products, with no licensing component.
Nvidia has struggled to sell its H20 chips in China, with the company trying to navigate demands from Washington and Beijing at the same time. In mid-August, Trump engineered a deal that granted Nvidia licenses to sell H20 chips to China in exchange for a 15% cut of those sales, but Nvidia has said it has not sent any H20 chips to China.
While the deal does not do much to help Nvidia's issues in China, analysts noted that it carries political upside in the U.S. Nvidia CEO Jensen Huang was seen among other business leaders with Trump during the U.S. president's state visit to the United Kingdom on Thursday.
https://finance.yahoo.com/news/nvidia-bets-big-intel-5-110333928.html
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