How Nvidia’s Intel investment gives it a ‘competitive boost’

00:00 Speaker A

And Intel shares are surging this morning after an Nvidia announced a $5 billion investment in the company. The two companies will also work together to develop chips for data centers and PCs. Joining us for more Patrick Morehead, more insight strategy founder, CEO and chief analyst. Pat, you are steeped in these semiconductor companies, you know the history well, you know the product cycle well. What does this mean? I mean, this is a surprise here. Um, what does this mean for Intel first of all, let’s take that part of it.

00:43 Patrick Moorhead

Yeah, Intel is very straightforward. There’s nothing but upside for Intel here. It’s net, net gains on the PC front and net gains on the uh AI and data center fronts. and no question about it. I the only question here, I think I was expecting uh a little bit more conversation about foundry and while it’s true that the X86 chiplets are made by Intel uh foundry, I was looking for something a little bit more maybe a larger deal that said that uh Intel would be manufacturing Nvidia GPUs. It’s not that it’s not going to happen, it just wasn’t part of this announcement.

01:42 Speaker A

Yeah, and Pat, that’s really interesting that you picked up on that because obviously this has been the big question for Intel and the foundry business, right? It’s making chips for itself, but when is it going to get some other clients outside of it? Um, what does this say that Nvidia is not making that part of this agreement today? Does that imply it doesn’t have the confidence in in Intel’s capacity to do so?

02:14 Patrick Moorhead

I think it’s, well, uh first of all, uh, Intel has a road map of a foundry, right? They have 18A and then a year later 18P, and then what’s called 14A, uh, after that. And, um, I do believe that Nvidia is evaluating uh those different processes and steps and I do believe there are negotiations that that are are going on and by the way, that’s not just Nvidia. I think that Apple and and other other companies out there. Um, Nvidia has loyalty to TSMC, uh, and I think that doing something like this, uh, might be viewed as maybe a lack of loyalty as opposed to let’s say a lack, um, of Intel not having the technology. I think there are good questions on execution. I think uh as soon as Intel uh cranks out its own Intel 18A chips, uh the first one called Panther Lake uh in in a few months, I think confidence uh will absolutely rise and I do think that we will see some foundry customers sign up with uh with Intel.

04:08 Speaker A

Um, and from Nvidia’s side, Nvidia obviously is not a charity, right? So there must be something in this agreement for them. What do they get out of it?

04:25 Patrick Moorhead

Yes, so I think what it does, it gives them uh optionality. So let’s look at the PC side first. Uh AMD is making waves in the PC market right now. They’re taking market share and every single uh socket that that goes in with an AMD CPU and an AMD GPU means that that Nvidia might not be part of it. Nvidia still owns the the higher end of the GPU uh market, but what this does is gives them an extra added competitive boost here, another option that might be able to better compete, quite frankly, with Apple where you have a super high-end GPU and an optimized CPU uh from Intel that runs X86 software, which is really important right now where most games, most pro developers um are X86 and and uh instruction sets. So it gives them uh um a potential upside there. Uh it really is about optionality. Uh I did talk to to to sources last night who told me that the Nvidia road map is not going to change, which means that they will have both arm and Intel uh options out there for their end customers for the hyperscalers, uh for enterprises and and people like that. I do think, uh let’s say these new products come out in two and a half years from now, uh it might lead to lead to confusion, but listen, one person’s confusion is another person’s optionality and whether you want to pick Intel or whether you want to pick Arm uh for the CPU, all things equal, uh more options are are better for end customers.