Nvidia is investing $5 billion in Intel. In return, Intel is customizing data-center processors for Nvidia and using the graphics and AI juggernaut’s GPUs in PC products.
Stock Deal
- Nvidia is buying in at $23.28 per share, a 7% discount from Intel’s prior close.
- Intel’s stock price jumped on the news, raising the effective discount to 26%.
Long-Time Partners
- Nvidia has supported x86 host processors for its data-center GPUs but favors its Arm-based processors for large systems. The company mates its Arm-based Grace with its Hopper and Blackwell GPUs to form modules it calls superchips.
- On the PC side, Intel has dominated the processor market, and most of its chips integrate GPUs. The company has struggled to dent the discrete-GPU market, which Nvidia dominates. Physically, however, the integrated GPUs have been chiplet based in recent PC-processor generations, such as Arrow Lake.
NVLink
- Grace integrates Nvidia’s NVLink C2C interface for high-throughput data transfers between CPU and GPU domains.
- Nvidia has recently disclosed NVLink Fusion, a program whereby it licenses NVLink C2C (its parallel, clock-forwarded chip-to-chip interface) and offers NVLink (its faster serdes-based interface) chiplets for integration with host (server) processors and, surprisingly, non-Nvidia AI accelerators.
- The announced deal calls for Intel to customize data-center x86 processors for Nvidia to integrate and sell. We expect these to be Xeons with NVLink C2C interfaces at a minimum.
PC Processors
- The deal also calls for Intel to build x86 chips integrating Nvidia GPU chiplets.
Analysis
- For the loss-making Intel, $5 billion is a welcome infusion that follows recent government and SoftBank investments. For Nvidia, it’s technically material but practically insignificant.
- We doubt that custom Xeons will affect Nvidia’s development of homegrown host processors. The next of which, Vera, will employ an Nvidia-designed, Arm-compatible CPU. The x86 alternative will stand separately for customers requiring compatibility.
- We remain skeptical of Intel’s Jaguar Shores AI-processing project, and this deal only lessens our meager confidence in the project.
- On the PC side, we expect Nvidia to keep pursuing an Arm-based integrated solution.
- Intel’s PC-graphics organization is at risk. Its discrete products haven’t captured meaningful share and were already at risk of termination. If Intel integrates only a high-performance Nvidia GPU to help it compete with AMD’s Halo products, then the organization can continue developing low-end offerings. But, given that Intel already employs GPU chiplets and a homogenous GPU architecture is easier to maintain, we see potential for Nvidia to displace indigenous Intel GPUs throughout the product stack.
- A manufacturing agreement isn’t part of this deal, underscoring Intel Foundry’s toxicity.
Bottom Line
For a tidy sum, Nvidia draws a frenemy closer and undermines that company’s efforts to diversify from its core CPU business.