Nvidia announced on Thursday it will invest $5 billion in Intel through a strategic chip partnership that signifies one of Silicon Valley’s most strategic power shifts.
As per the deal, Nvidia will purchase Intel stock at $23.28 per share, on a 6.5 per cent discount. The two companies will collaborate on PC and data centre processes with Intel embedding Nvidia’s graphics into consumer chips and manufacturing specialised processors for Nvidia’s AI systems.
Intel, once the undisputed king of chip-making, has fallen from grace as it is now valued at just under $100 billion.
Nvidia, meanwhile, holds a market value of $4 trillion, making it the world’s second-most valuable company.
"This historic collaboration tightly couples Nvidia's AI stack with Intel's x86 ecosystem," said Nvidia CEO Jensen Huang, referring to Intel's dependence on Nvidia.
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The investment follows recent lifelines including US government backing in the form of buying a 10 per cent stake in Intel and SoftBank's $2 billion injection as the firm struggles to fund its manufacturing ambitions.
This is a volte-face from Intel’s circumstances 20 years ago when then-Intel CEO Paul Otellini pitched to his board the idea of acquiring Nvidia with the understanding that graphics chips will revolutionise data centres. But back in 2005, directors failed to comprehend Otellini’s vision, instead balking at the steep price tag to back an internal project called Larrabee that led to hundreds of millions going to waste before collapsing in 2009.
That was when Nvidia seized the moment and begun processing specialised chips built for machine-learning. Nvidia’s ready-made solutions soon took centrestage in the tech world, helping it milk $200 billion in annual revenue, catapulting it to the position of leading chip-maker.
Intel has since tried desperately to chase the AI wave through acquisitions like Nervana Systems ($400 million) and Habana Labs ($2 billion), but failed to match up to Nvidia.
Its CEO, Lip-Bu Tan, who replaced ousted CEO Pat Gelsinger in March, admits that Intel won't compete with Nvidia's high-end systems "anytime soon."
Meanwhile, its partnership with Nvidia represents a surrender to the company it could have once owned.
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