Nvidia takes $5 billion stake in Intel, offers chip tech in new lifeline to struggling chipmaker

SAN FRANCISCO/WASHINGTON (Reuters) - Nvidia said on Thursday it would invest $5 billion in Intel, throwing its heft behind the struggling US chipmaker just weeks after the White House engineered an extraordinary deal for the federal government to take a massive stake in the company.

Nvidia's support offers Intel a new chance after years of turnaround efforts failed to pay off, and triggered a 23% jump in the U.S. chip manufacturer's shares. The stake will make Nvidia one of Intel's largest shareholders, giving it roughly 4% of the company after new shares are issued.

Intel – once the chip industry's flag bearer that claimed to put the "silicon" in Silicon Valley – appointed a new CEO, Lip-Bu Tan, in March. He quickly came under fire from U.S. President Donald Trump, who called his resignation due to concerns about his connections with China. This led to a swiftly arranged meeting in Washington that ended with Intel's unusual arrangement to give the U.S. a 10% stake in the company.

Nvidia CEO Jensen Huang told reporters on a call on Thursday that the Trump administration had not been involved in the partnership deal but would have been supportive. Huang was seen with Trump and other business leaders during the U.S. president's state visit to the United Kingdom on Thursday.

This new pact includes a plan for the two companies to jointly develop PC and data center chips, but crucially, will not involve Intel's contract manufacturing business - or foundry - making computing chips for Nvidia. Intel's foundry business will, however, supply the central processors and advanced packaging for the joint products. Huang said his company was continuing to evaluate Intel's foundry technology and had been working with the rival for nearly a year.

"This may be the first step of an acquisition or breakup of the company (Intel) among U.S. chip makers though it is entirely possible the company will remain a shadow of its former self but will survive," said Nancy Tengler, CEO of Laffer Tengler Investments, which holds Nvidia stock.

Nvidia, whose must-have chips are powering a global artificial intelligence boom, said it would pay $23.28 per share for Intel common stock, slightly below the $24.90 Wednesday closing price but higher than the $20.47 price the U.S. government paid. Nvidia shares were up 3.8% on Thursday.

The companies did not disclose the financial terms of their collaboration but said they would make "multiple generations" of future products.

The deal adds to Intel's growing reserve of capital, following a $2 billion investment from Softbank and the $5.7 billion investment from the U.S. government.