Intel's stock is soaring. Here's why Nvidia is investing $5 billion in the chip maker.

By Britney Nguyen

Analysts say the new partnership could help Nvidia in the PC market and offer support to Intel's server business - though they note the announcement doesn't mention Intel's foundry

Nvidia said it would be investing $5 billion in Intel's stock.

Intel Corp.'s stock soared Thursday, as Wall Street said a new tie-up with Nvidia Corp. could help the company's server business and give it greater legitimacy - and more money.

Under a new agreement announced early Thursday, Intel (INTC) will design and manufacture chips with Nvidia (NVDA), which will also make a $5 billion investment in Intel's stock.

Shares of Intel gained 23%, their biggest one-day gain since a 26.4% boost seen on Oct. 29, 1987, according to Dow Jones Market Data. Nvidia's stock rose 3.5%.

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The chip makers are collaborating to design and manufacture "multiple generations" of custom chips for data centers and personal computers, Nvidia said in a statement on Thursday. Analysts noted that the partnership seemed product-focused for now, as the initial information from the companies didn't refer to Intel's foundry business, at which chips are manufactured.

Nvidia said it and Intel are focused "on seamlessly connecting Nvidia and Intel architectures" using its interconnect technology called NVLink, which allows multiple graphics processing units to connect to each other or to central processing units for fast and efficient communication between chips in data centers. The interconnect enables scaling to handle intense artificial-intelligence and high-performance computing workloads.

It's the latest source of relief for Intel and its investors after the company agreed in August to sell a 10% stake in the company to the U.S. government.

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As part of the collaboration, Intel will develop custom CPUs based on its x86 computer chip architecture for data centers, which Nvidia said it plans to integrate into its AI infrastructure. The chip-industry pioneer also plans to build x86 system-on-chips that can be integrated into Nvidia RTX GPU chiplets, which will be able to run in "a wide range of PCs that demand integration of world-class CPUs and GPUs," Nvidia said.

Aside from seeing potential areas for collaboration in the data center, "given Intel's strength in the client segment, Nvidia may also view a partnership with Intel as an opportunity to better compete in that market," Ray Wang, lead semiconductor analyst at The Futurum Group, told MarketWatch. "Client" is industry terminology that refers to the PC business.

For Intel, the collaboration could help slow its market-share erosion in the server CPU business, according to Mizuho research analyst Vijay Rakesh.

Although Wang said it's too early to determine which company stands to gain more from the partnership, in his view, the development appears to be more positive for Intel, given mounting challenges in the company's foundry business and increasing competition on the client side. But he noted that the announcement does not mention Intel Foundry Services, which to him suggests the collaboration is focused only in the data-center and client businesses for now.

"More importantly, as Intel is navigating the 'AI story' for the firm's culture, the deal with Nvidia is at minimum positive news the management and investors of Intel would love to see," Wang said in emailed comments.

Wang added that he sees the $5 billion investment benefiting Intel's partners such as ASML Holding and Synopsys Inc., as Intel could have more capital-expense firepower.

ASML's U.S.-listed stock (ASML) rose 6.4% on Thursday, and Synopsys' stock soared 13%.

Mizuho desk-based analyst Jordan Klein noted that Intel is one of Synopsys's largest intellectual-property customers. "Major cutbacks" from Intel drove Synopsys to deliver disappointing guidance recently, he noted, but this new development could prove promising.

On the other hand, Klein said the deal is bad news for Advanced Micro Devices Inc. (AMD), which competes with Intel in the CPU market. AMD shares slipped 0.8%.

Also read: Is AMD in trouble as Nvidia and Intel pair up? Not so fast, analysts say.

Gil Luria, head of technology research at D.A. Davidson, told MarketWatch that he saw two reasons behind Nvidia's investment in Intel. "It can help diversify some production away from TSMC and it can support the U.S. administration as it tried to prop up the only American company able to produce chips in the US," Luria said in emailed comments.

Taiwan Semiconductor Manufacturing Co. Ltd.'s U.S.-listed shares (TSM) gained 2.2% on Thursday.

Luria also noted that Nvidia has made several investments across companies in the AI space "in order to keep the momentum for the emerging technology."

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-Britney Nguyen

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09-18-25 1942ET