Nvidia said in a filing on Monday that it has purchased Intel shares worth $5 billion, carrying out a transaction announced in September. The chip designer said it would pay $23.28 per share for Intel common stock, in a deal that is seen as a major financial lifeline for the chipmaker after years of missteps and capital-intensive production capacity expansions drained its finances.
According to previous reports the stake will make Nvidia one of Intel’s biggest shareholders, giving it roughly over 4% of the company after new shares are issued to complete the deal.
The agreement with Nvidia includes plans to jointly develop personal computer and data center chips, but it will not involve Intel’s contract manufacturing business, known as a “foundry” in the chip industry, making chips for Nvidia. Analysts believe that for Intel’s foundry to survive, it will eventually have to win a large customer such as Nvidia, Apple, Qualcomm or Broadcom.
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Nvidia CEO Jensen Huang had said in September, “This historic collaboration tightly couples Nvidia’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.”
Meanwhile, Chris Beauchamp, chief market analyst at IG Group in London said that the deal is “[…] a reflection of Nvidia looking to diversify to an extent its investment within the U.S. and as well to gain some brownie points with the U.S. government.”
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This deal might put Intel’s competitors TSMC and AMD at a disadvantage. Taiwan’s TSMC currently manufactures Nvidia’s flagship processors, a business the company could one day extend to Intel. AMD, which competes with Intel for supplying chips to data centers might also lose due to Nvidia’s backing.
U.S. antitrust agencies had cleared Nvidia’s investment in Intel, according to a notice posted by the U.S. Federal Trade Commission earlier in December. Nvidia shares were down 1.3% in premarket trading, while Intel stock was little changed.
The agreement was signed during a challenging time for Intel. The company had been facing trouble ever since its newly appointed CEO Lip-Bu Tan came under fire from U.S. elected officials, including President Donald Trump who called for him to resign over his connections with China. This was followed by a meeting in Washington, following which there was an agreement to give the U.S. government a 10% stake in the company.