Nvidia-Intel pact leaves AMD exposed in chip wars — Dado Ruvic/Reuters

Nvidia’s deal with Intel could put the struggling chip maker’s next-generation manufacturing technology on a stronger footing, even without a direct commitment from the AI chip leader to use that technology to make its own chips, analysts said.

Nvidia on Thursday invested US$5-billion in Intel for a stake of roughly 4%, and the two firms agreed to a deal to supply chips to one another to create “multiple generations” of joint products. Those products will connect Intel’s central processors and Nvidia’s artificial intelligence and graphics chips with a speedy and proprietary Nvidia connection technology called NVLink.

This could give Intel a leg up against rivals such as AMD because its chips will be attached to Nvidia’s flagship products in a way that no other third-party chips currently are, analysts said. The joint products — in early stages of development and likely to be made on future manufacturing lines — could also provide an indirect boost to Intel’s 14A manufacturing process slated for 2027. Analysts have said this process is critical to its success, and Intel itself has warned it may not be able to pursue 14A if the company fails to get enough customer commitments to justify the expense of building it.

“Any relationship with Nvidia at this point, while not explicitly talking about the foundry services, should be seen as a possible extension of the partnership in the future,” Jack Gold, principal analyst with J Gold Associates, said in a note, referring to Intel’s manufacturing arm.

Intel Foundry will supply central processors for the joint products and package chips from Nvidia for some of them, as part of the deal. Engineers from both companies will work together to turn Nvidia’s technology into a physical chip made at Intel.

This is significant for both because Intel does not always use its own factories to craft its own chip design, often relying on TSMC, just as Nvidia does.

But if Intel supplies the chips for the joint products and they prove to be popular, the partnership could help provide the production volumes that Intel needs to make its manufacturing investments viable, analysts said.

Good returns

“It gives me a higher degree of confidence that 14A continues, at which point Intel should have very good returns” on its 14A investments, said Ben Bajarin, CEO of technology consulting firm Creative Strategies.

For Nvidia, the deal also means better access to a large swathe of business and government customers with decades of software written for Intel’s chips. The primary loser is AMD, which designs different types of chips that compete with Nvidia and Intel in their respective markets, according to industry analyst Gold.