NVIDIA (NVIDIA) and Intel (Intel) jointly announced on the 18th that they will cooperate. Both parties will develop multi-generation customized data centers and personal computer products, with the goal of accelerating the application and work load across super-large scale, enterprises and consumer markets. This cooperation not only symbolizes a strong partner of two major operating leaders, but NVIDIA will also spend $5 billion to strategically invest in Intel's common stock, highlighting its high confidence and commitment in this cooperation.

In this regard, business and financial market experts suggest that the focus should be on the following key cooperation factors.

Intel earned the "Lifeline" of financial and fame

For Intel, this transaction not only brought huge financial incentives, but also significantly improved its brand prospects after signing a $8.9 billion agreement with the US government only a few days ago. However, Shay Baloor, chief market strategist at Futurum, Austin tech market information company, pointed out that for Intel, this is more of a narrative rehabilitation than a financial loss.

Shay Baloor said that NVIDIA's 5% share purchase is to issue a signal to the market, indicating that Intel still plays an important role in the AI ​​supply chain. This situation gives Intel a symbol of a differentiated product, causing it to remove the awkward character originally considered a CPU supplier only.

Even though Intel's processing technology may be lagging behind, being an x86 partner with NVLink native integration capabilities has brought it back to the growth curve of annual composite growth of AI data center capital expenditures. All this reinforces a new core reality in Intel's tech sector, that is, AI economy will run on systems standardized by NVLink, and NVIDIA decides who can access it.

NVIDIA seeks diversification to meet pressure on China's ban and competition

For NVIDIA, this transaction is a "green light" pass toward diversification. NVIDIA does not need to make too much adjustments in terms of local politics. But as we enter 2025, this thinking model has changed due to faced taxes and trade wars. In this way, NVIDIA has an urgent need for diversification, one of the reasons is that the cloud sector is becoming increasingly concentrated, and service suppliers are facing reducing costs and converting operation into internal pressure. Amrita Bhasin, the joint founder and executive president of AI enterprise Sotira Companies, pointed out in his analysis that NVIDIA needs to develop diversification plans or implement diversification in order to maintain competition and prove its share price rationality to stakeholders, while attracting the next generation of technical talents.

More importantly, the political risks of ground cerebral have already emerged. On September 17, China prohibited domestic technology companies from deploying NVIDIA's AI chips. Sotira Companies thinks this is a big deal because it prevents Chinese technology manufacturers, including Alibaba and ByteDance, which used to be a major NVIDIA customer, from purchasing NVIDIA's RTX Pro 6000D chips, even if those chips have been ordered.

At this time, NVIDIA is busy competing with other chip competitors. Sotira Companies warned that NVIDIA will face risks as customized chips (ASICs) become increasingly important in the cloud suppliers, coupled with the aggressive development of other AI chip competitors. At this challenging time, the sales ban in the Chinese market is undoubtedly a worse problem for NVIDIA. Therefore, it would be a great way to compete with Intel's alliance to create new ecological relationships.

Market expectation wins are emerging, Intel's future fate is uncertain

According to market experts, in addition to the growth of the share prices of the two companies in the cooperation case, there are more profound meanings worth paying attention to behind this transaction. In particular, NVIDIA's $5 billion investment in Intel is a good practice for the company, the country and consumers, especially after the U.S. government announced its 9.9% stake in Intel. Because this is for Intel, the investment in other private companies will help further solve the current problems within the company.

Market experts expect that this cooperation case will be a major turnaround, which may be the first step for American chip manufacturers to acquire or spin off Intel. Nevertheless, it is entirely possible that Intel will survive on its own in its former form. In addition, in this reshuffle of industry, the winger has been locked in the market. At present, the market is optimistic about NVIDIA (NVDA), Broadcom (AVGO), Ultramicro Semiconductor (AMD), and Lam Research Corp. (LRCX), and these are the winners.

Overall, NVIDIA's investment in Intel has caused huge repercussions in the chip and AI data center markets. For NVIDIA, this is an important measure to diversify strategies for land political pressure (such as China's ban) and market reconciliation. For Intel, this is a key opportunity to re-establish its AI supply chain, especially through NVLink integration, its technical affairs and market position. Market observers regard this as a clear mark of the structural changes being carried out by the semiconductor industry.