Nvidia to invest $5 billion in Intel and co-develop chips

By the numbers: Nvidia is buying common stock at $23.28 a share, a nearly 7% discount to Intel's closing price Wednesday.

• In afternoon trading on Thursday, Intel shares surged more than 22%, representing a gain of nearly $4.4 billion — on paper, anyway — for the U.S. government.
• At a press conference Thursday afternoon, Nvidia CEO Jensen Huang said that the two companies had been having discussions for about a year. "The Trump administration had no involvement in this partnership at all," he said.
• The New York Times, citing two people with knowledge of the conversations, reported that the administration had approached Nvida about an Intel investment early this year.

What they're saying: "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," Huang said in a statement.

• "Together, we will expand our ecosystems and lay the foundation for the next era of computing."

The big picture: The deal, which is subject to regulatory approval, comes at a time when the semiconductor industry is at the center of U.S.- China relations and the revolution in AI.

• It's also a poignant symbolic move: Intel was not long ago the world's most valuable chip maker, but now Nvidia wears the crown.

Zoom in: Under the deal, Intel will build central processing units for Nvidia that it will integrate into its AI infrastructure platforms to sell to data centers.

• Intel will also build and sell PC chips that will integrate Nvidia graphic chiplets. Pointing to the opportunity in some 150 million laptops being sold every year, Huang said at the press conference, "We are now going to combine the best GPU and the best CPU."

The intrigue: The announcement does not say whether Nvidia will use Intel's foundry to manufacture its chips.

• At the Thursday press conference, the CEOs deflected questions about manufacturing. "This is more about product collaborations," Intel CEO Lip-Bu Tan said.

• Intel's manufacturing business has been a money-loser, and the company had earlier faced pressure from shareholders to spin it off.
• After the government invested, Intel's CFO told a conference that the stake was intended to prevent the company from selling or spinning off the manufacturing business, per the FT.
• Both Trump's action and the CHIPS Act under former president Biden have been efforts to restore chip manufacturing prowess in the U.S.

Yes, but: Many U.S. companies, including Nvidia and Apple, have preferred to have their chips made by Taiwan Semiconductor Manufacturing (TSMC), which is also expanding its U.S. production.

• Some analysts were cautious about the deal. "The expanded partnership is solely for products, which has completely missed the AI boat, and we question whether this will significantly improve [Intel's] data center prospects... and drive earnings upside," Angelo Zino, senior vice president and equity analyst at CFRA Research, wrote.
• "That said, we do believe it does set up the prospects for [Nvidia] to eventually leverage [Intel's] foundry business as [Intel] desperately seeks a major external partner."

What we're watching: Thanks to the Trump administration, is Intel finally on the comeback trail?

Editor's note: This article was updated with comments from Nvidia CEO Jensen Huang's press conference and other information throughout.