Market Implications from Today's Nvidia-Intel Collaboration ?3

14:23 18-Sep-25

The most interesting part of the very short prepared remarks of the conference call was unintentional discussion of the prior night's Cognac from 1912.  Neither CEO said anything of consequence and Nvidia's was clearly reading haltingly from a prompter.  The entire call was completely devoid of numbers.

The first follow-up in Q&A essentially confirmed the earlier inference that Nvidia won't be using Intel Foundry in the foreseeable future.  The CEOs were also unable to provide even a guess at when products would be available.  What was clear is that this is NOT cutting edge technology.  Nvidia NVLink uses copper capables for intra-rack communication, unlike the optical technology that has been discussed in the parent service.  Instead, Nvidia will buy Intel CPUs for data centers, and Intel will buy Nvidia GPU chiplets to integrate into its CPU SoCs.  This particularly makes sense for Nvidia, which may need product volume to replace China sales.  The x86 architecture still has the most developers, and a transition to older yet more efficient tool sets there may help to optimize AI efforts.  Intel's motives seem similar as it otherwise has no credible path to market AI PCs.

Almost half of the Q&A also focused on government influence, where Nvidia repeatedly denied direct involvement from the administration, yet said that Lutnick had already been informed and was "very supportive", which speaks to my weaponized policy comments, below.

Despite all the superlatives, I see the equity stake as token move meant to help shore up Intel.  Nvidia has a $4.1T market cap today, and almost $56.8b of cash on the balance sheet as of last quarter.  Intel's market cap was $116.3b before today.  It had $9.6b in cash on the balance sheet and needs several times that to complete its foundry projects.  Its CEO's comments led me to continue to suspect that neither 14a or 18a were showing viable yields yet.  To me, both companies appear to be trying to shore up market share and control costs with this move.

I see costs as the most crucial piece that is missing in assessing the impact for actual products for both companies, whenever they arrive.  Although Intel has impressively flexible packaging technology, shipping and packaging and between multiple vendors is bound to wind up being more expensive.  If the companies are lucky, tariff policy will finally be settled many years in the future when such matters become a practical issue.  Ultimately though, this multiple aspects of this deal show how American companies are banking short term market gains while shoring up their plans up against harder times ahead.

Intel and Nvidia are collaborating to integrate their CPU and GPU products for data centers and personal computing, and the latter will purchase $5b INTC shares, which have rose over 30% to trade as high as $33.10 in the initial pre-market reaction.  By contrast, NVDA shares have merely recovered a few percent of their recent weakness to trade a high as $175.  Way down towards the bottom of the press release is the fact that the purchase price is $23.28, which is a 6.5% discount to last night's closing price.  That means that Nvidia will be purchasing almost 215M shares, which Intel did not have outstanding, resulting 4.6% dilution for prior INTC shareholders at price that is only about a percent higher than what Softbank paid, but almost 14% higher than the level that the White House took Intel for in return for promised support.  Also missing from the press release is any mention of Intel Foundry services for the new products, but there is a press conference scheduled for 1pm.  I am likely to follow up on that, though possibly only briefly.

To me, this highlights how policy is being weaponized, and though the market certainly doesn't seem bothered, I note that this can mainly be used against American companies.  The long versus short term effects of that are likely to be very different, if the practice continues.  However, China is dropping it antitrust investigation of Google, but continuing its probe of Nvidia, which is seen as trade talk maneuvering ahead of the ever-moving tariff deadline.  For anyone who still thinks it's worthwhile to keep track, that currently stands at November 10th, right around when the SCotUS will take up the issue.

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