Nvidia’s $5 billion bet on Intel

(Reuters) –Nvidia said on Thursday it will invest $5 billion in Intel, throwing its heft behind the struggling U.S. chip foundry weeks after the White House engineered a deal for the U.S. government to take a massive stake in the company.

Nvidia’s support represents a new opening for Intel after years of turnaround efforts at the famed U.S. manufacturer failed to pay off. Intel shares surged 30% in premarket action.

Here are some comments from analysts on this deal.

COMMENTS:

CHRIS BEAUCHAMP, CHIEF MARKET ANALYST AT IG GROUP, LONDON

“It’s impressive to see the (share) move and once again from the U.S. government taking a stake in Intel and then Nvidia sprinkling its magic is going to move the share price.”

“It’s a reflection of Nvidia looking to diversify to an extent its investment within the U.S. and as well to gain some brownie points with the U.S. government.”

“It doesn’t change the bigger problem which Nvidia is facing with China, but it keeps it in favor with the U.S. government.”

“It’s a sign that Nvidia has to broaden out its own operation and it’s a sign of Intel looking to become far more of a player within the market.”

IPEK OZKARDESKAYA, SENIOR ANALYST AT SWISSQUOTE BANK

“What Intel needs right now is a viable model and to make sure that clients are interested in this product. So this agreement from Nvidia to invest as much as $5 billion to somehow co-develop chips for PCs and data centers is fresh news for Intel.

“Intel needed a partner and Nvidia is the best partner for a company where investors are mostly in doubt about the future and the company’s ability to get back on the seat having lost the AI turn.”

“For Nvidia, it is possible that this decision is politically backed because what the US government wants is these companies producing chips in the United States and they have also taken a stake in Intel in order to force them to build that Ohio plant, which would be one of the world’s biggest chip making plants in the U.S. “

ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, NY”This still has to pass regulatory approval and it doesn’t mean that NVIDIA necessarily is going to be producing its current GPUs at the Intel fab that’s opening. They’ll likely continue to have to do that manufacturing with Taiwan Semiconductor, but it’s a step in the right direction for U.S. manufacturing.”

(Reporting by Johann M Cherian, Shaswat Chauhan, Purvi Agarwal in Bengaluru and Tristan Veyet in Gdansk; compiled by Arpan Varghese; Editing by Sriraj Kalluvila)