Nvidia (NASDAQ:NVDA) CEO Jensen Huang said Taiwan Semiconductor Manufacturing (NYSE:TSM) will provide the foundry support for the “revolutionary” chips they are making with Intel (NASDAQ:INTC).
“Nvidia and Intel are both successful customers of TSMC,” Huang said during a press conference on Thursday afternoon. “They are a world-class foundry and support customers of diverse needs. You can’t overstate the magic that is TSMC. But today, our partnership is 100% focused on the custom CPUs we are building for data centers that can connect to the Nvidia AI ecosystem.”
“We both still have a lot of respect for TSMC, and we will continue to work with them,” said Intel CEO Lip-Bu Tan. “We will still work on 14a and 18a and see if that can be used at some point in the future.”
As part of the deal, which featured a $5B investment by Nvidia in Intel, the two companies will use Nvidia’s NVLink, bringing Nvidia’s artificial intelligence and accelerated computing strength and Intel’s x86 architecture. They plan to combine Intel CPUs with Nvidia GPUs to create products for data center and PC markets.
“Together, our companies will create custom CPUs for data center platforms,” Huang said. “For personal computing, we are going to create new Nvidia chips that integrate and fuse the world’s best CPUs and GPUs. The era of accelerated and AI computing has arrived. Intel and Nvidia are partnered to drive it forward.”
“This corroboration will build on the core strengths of both companies,” Tan said. “This will unleash the new era of x86 innovation. I’m excited about what we can create together. Clearly, this is all about the scale. We can do even more working together … Right now we are focused on collaboration, and we can talk about the process down the road.”
Huang said the new products will have a total addressable market of more than $50B when considering their utilization in data centers and PCs.
“There is an entire segment of the market that ties in CPU and GPU that Nvidia has largely not addressed,” Huang said. “We use NVLink to fuse the CPU and GPU into a new class of integrated laptops the market has not seen yet … This is going to address some $50B per year opportunity … The data center CPU market is $25B and the PC notebook market is 150M sold per year.”
Huang also said the deal will not affect its relationship with Arm (ARM).
“We will continue to build our Arm roadmap, and this won’t affect that at all,” he said.
He said the deal was created solely by Huang and Tan.
“The Trump Administration had no involvement in this partnership at all,” Huang said. “They would have been supportive, of course. I told (U.S. Commerce) Secretary (Howard) Lutnick today, and he was very excited about two American companies working together.”
Analysts believe the partnership provides upside for Intel, but the company still needs to show more that it’s back as a chipmaking power.
“This investment in INTC represents a large vote of confidence from NVDA,” said Julian Lin, Investing Group Leader for Best of Breed Growth Stocks. “The momentum may go a long way towards the company’s turnaround, but I emphasize that it still needs to show more signs of progress towards that turnaround. In comparison to other stories like Oracle (ORCL), this latest development appears to have more hopes built into the momentum.”
“A bit of an alliance between NVDA and INTC should be a net negative for AMD (AMD), as it means more powerful competition, I believe,” added Jonathan Weber, Investing Group Leader for Cash Flow Club. “TSM may lose some foundry business to Intel in the future but remains very well positioned and the clear manufacturing leader for the time being.”
Arm shares had slipped 3.5% during afternoon trading, while TSM was up 2%. AMD had declined 1.5%.