Nvidia will be buying intel shares at $23.28 apiece, sending shares of the once chip industry leader soaring by 23%. Thursday’s move was the biggest in a single session for Intel going back to October 1987.
Intel and Nvidia have framed their agreement in a way that allows them to move into areas of the computer market that they do not currently cater to. According to Nvidia CEO Jensen Huang, that opportunity could be worth $50 billion annually.
This marks another fund infusion for Intel after the US government picked up a 10% stake last month, while SoftBank announced a $2 billion investment. The company is also raising cash by selling assets to investors. On paper, the value of the US government investment has now surged by more than 55% to nearly $14 billion.“We thought it was going to be such an incredible investment,” Huang said on a conference call Thursday with his Intel counterpart, Lip-Bu Tan. “The return on that investment is going to be fantastic.”
As per the deal, Intel will offer PC chips that combine the general purpose processing with powerful graphics components from Nvidia, helping it compete with rival AMD, which has been gaining market share in the laptop and desktop market. No timeline has been shared as to when the parts made by both would go on sale.
While Nvidia’s shares surged over 3%, those of AMD fell nearly 6% after the announcements were made.
The news is “very marginally negative for AMD,” Wolfe Research analysts said in a note, and likely doesn’t change their thesis for Intel. “What’s unclear is whether this represents token cooperation intended for political purposes, or if it’s the start of a wider collaboration that would more significantly benefit Intel,” they said.
