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How Nvidia’s $5B Intel stake could bolster Intel’s next-gen chipmaking

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Nvidia’s (NVDA.O) $5 billion investment in Intel (INTC.O) may give the struggling chipmaker crucial momentum for its next-generation manufacturing efforts, even though Nvidia has not committed to using Intel’s factories for its own chips, analysts said.

The deal, announced Thursday, gives Nvidia a roughly 4% stake in Intel and creates a partnership to develop “multiple generations” of joint products. These products will link Intel’s central processors with Nvidia’s AI and graphics chips via NVLink, Nvidia’s high-speed proprietary interconnect.

Analysts say the collaboration could indirectly strengthen Intel’s 14A manufacturing process, set for 2027, which the company has warned may not move forward without sufficient customer demand. By tying its CPUs to Nvidia’s flagship products in ways unmatched by rivals, Intel could secure the production volumes needed to justify its costly investments.

“Any relationship with Nvidia at this point, while not explicitly talking about the foundry services, should be seen as a possible extension of the partnership in the future,” said Jack Gold, principal analyst at J.Gold Associates.

Under the agreement, Intel Foundry will supply CPUs for the joint products and package Nvidia chips for some of them. Engineers from both firms will collaborate to translate Nvidia’s designs into physical chips manufactured by Intel. This is notable given both companies often rely on Taiwan’s TSMC (2330.TW) for production.

“If these joint products prove popular, it gives me a higher degree of confidence that 14A continues, at which point Intel should have very good returns,” said Ben Bajarin, CEO of Creative Strategies.

For Nvidia, the deal offers better access to government and enterprise customers that run decades of Intel-compatible software. The main loser could be Advanced Micro Devices (AMD.O), which competes directly with both companies in CPUs and GPUs. “Having two major competitors combining their efforts is not exactly a positive outcome for AMD,” Gold noted.

Trump Administration Explores Potential Stake in Intel Amid Push for Domestic Chip Manufacturing

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The Trump administration is reportedly in discussions with Intel (INTC.O) to potentially acquire a stake in the U.S. chipmaker, Bloomberg News reported on Thursday, citing sources familiar with the talks. The move would be another example of President Donald Trump’s interventions in industries considered critical to national security. In the past, Trump has promoted multibillion-dollar government partnerships in semiconductors and rare-earth minerals, including a deal with Nvidia (NVDA.O) and an arrangement with MP Materials.

Intel declined to comment on the report but reaffirmed its commitment to supporting the administration’s efforts to bolster U.S. technology and manufacturing leadership. White House spokesman Kush Desai cautioned that discussions about “hypothetical deals” should be viewed as speculation until officially announced.

Intel shares rose more than 7% during regular trading and added another 2.6% in after-hours trading. The discussions follow a recent meeting between Trump and Intel CEO Lip-Bu Tan, occurring just days after Trump publicly called for Tan’s resignation over his investments in Chinese technology firms, some of which have ties to the Chinese military. Details about the size of the stake and pricing are still under negotiation.

Analysts suggest the government stake would likely aim to support Intel’s domestic manufacturing expansion and job creation. Intel has previously warned it may need to exit chip manufacturing without sufficient external customers and has planned to slow construction on new Ohio factories. CEO Lip-Bu Tan, in his role for just over six months, has been tasked with reversing years of setbacks that left Intel behind in the fast-growing AI chip market dominated by Nvidia.

Market experts note that any potential deal could include tariffs designed to encourage major clients like Nvidia, AMD (AMD.O), and Apple (AAPL.O) to utilize Intel Foundry services. While government stakes in companies are not unprecedented, some investors question whether Intel, with stable revenue exceeding $50 billion annually despite a loss in industry leadership, requires direct government investment.

China’s SMIC Reports Resilience Despite U.S. Tariffs, Expects Tight Capacity Through October

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China’s leading semiconductor foundry, Semiconductor Manufacturing International Corp (SMIC), stated on Friday that U.S. tariff measures have not caused the “hard landing” initially feared. The company cited strong domestic demand that will keep its production capacity tight until October.

Co-CEO Zhao Haijun said during a post-earnings call that customers have largely mitigated the impact of U.S. President Donald Trump’s tariff plans—such as the proposed 100% tariff on chip imports—through inventory stockpiling and sourcing from alternative suppliers. He noted that previous tariff rounds increased costs by less than 10% for overseas customers.

China’s additional tariffs on U.S. goods reached 125% in April, following Trump’s tariffs effectively pushing the rate on Chinese goods to 145%. However, the latest semiconductor tariffs exclude companies manufacturing in the U.S. or committed to doing so. SMIC, blacklisted by the U.S. in 2020, has no U.S.-based manufacturing.

SMIC’s revenue for Q2 grew 16.2% year-on-year to $2.2 billion, though its profit declined 19.5% to $132.5 million, missing analyst expectations. The company shipped 2.4 million eight-inch equivalent wafers in the quarter, a 4.3% increase from Q1.

Capacity utilization rose to 92.5%, and monthly production capacity expanded modestly by 1.85% quarter-on-quarter to 991,000 wafers. Zhao forecasted continued tight capacity driven by strong domestic demand, especially for analog, WiFi, Ethernet, and memory controller chips.

SMIC expects Q3 revenue growth of 5% to 7% over Q2 but anticipates the industry’s typical seasonal slowdown in Q4, with rush orders and early shipments likely to taper.

SMIC’s shares in Hong Kong dropped over 5% following the report.