Wall Street analysts think through the Nvidia-Intel deal
TL;DR: Huge for Intel, helpful for Nvidia, and potentially bad for AMD.
Intel shares were on a tear Thursday, after Nvidia announced a $5 billion equity investment in the iconic, but struggling, American chipmaker.
Such a price shock suggests a major rethink of the outlook for Intel. But the nature of that rethink is worth digging into.
Wall Street analysts are already out with some notes giving thoughts on the implications of the deal. Here are a few, with a some Sherwood-provided translations, where appropriate, for those less than fluent in semiconductor-speak.
Evercore ISI
“We view the announcement as a positive for both companies: 1) for NVDA because custom x86 DC CPUs should translate to improved performance for its x86-CPU-based AI infrastructure, and it is extending its NVLink ecosystem into INTC products, and 2) for INTC, as the collaboration could help stem share loss to AMD in both DC and PC CPUs. Also, we view the NVDA investment in INTC as an important commitment and potentially initial step towards deeper collaboration.”
Translation: In AI data centers, Nvidia GPUs — the processing units the company is best known for — are often used in combination with Intel’s CPU chips.
So if Nvidia can collaborate on making custom Intel chips — using Intel’s proprietary x86 architecture — it might improve the overall performance of Nvidia’s AI systems.
Also, the collaboration could mean the super-fast connections Nvidia has developed to link up its GPUs — called NVLink — might start to be used more with Intel CPUs, which hasn’t been typical.
For Intel, the deal could bolster its sales of CPUs both for data centers as well as personal computers, where its dominance has been eaten way by Advanced Micro Devices.
Mizuho
“Near term, this positions INTC better as it develops custom Server CPUs and markets with NVDA, and gives NVDA a new market to increase NVLink and RTX GPU penetration, while a challenge for AMD. We believe the INTC-NVDA partnership could put AMD at a competitive disadvantage.”
Bernstein Research
“This looks like a product deal, not a foundry deal (at least for now). From the press release on the PC side Intel will “build and offer to the market x86 system-on-chips that integrate NVIDIA RTX GPU chiplets,” and on the datacenter side “Intel will build NVIDIAcustom x86 CPUs that NVIDIA will integrate into its AI infrastructure platforms and offer to the market.”
Hence while there would seem to likely be some packaging business in there for Intel there does not seem to be any agreements or commitments on the wafer foundry side (yet).
But frankly Intel can use the help on the product business just as much given share position in key markets has been bleeding.”
Translation: The deal seems primarily focused on development of new semiconductor products that should improve Intel’s access to the fast-growing AI market, rather than on making Nvidia a customer for Intel’s troubled contract manufacturing business, or “foundry,” in which it produces chips for others. (The troubled foundry division has been a long-standing headache for the company.)
Wedbush
“This is a game changer deal for Intel as it now brings them front and center into the AI game. Along with the recent US Government investment for 10% this has been a golden few weeks for Intel after years of pain and frustration for investors...This partnership focuses on leveraging NVDA’s AI and accelerated computing stack with Intel’s CPUs and vast x86 ecosystems to lay the foundation for the next wave of computing with AI.”
