Nvidia CEO Jensen Huang has not yet been able to replicate his success in cloud AI data centers in the enterprise, where Intel’s x86 dominates.
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ZDNET’s key takeaways
- Intel’s x86 technology helps Nvidia in enterprise AI.
- Custom chips for laptops will integrate both companies’ technology.
- Nvidia declined to say if it ever plans to use Intel’s factories.
Struggling chip maker Intel received a significant lifeline on Thursday from longtime rival Nvidia. The AI chip giant announced it would make a $5 billion investment in Intel and partner to develop chips based on Intel’s x86 microprocessor standard.
The move is seen as a way for Nvidia to broaden its lead with artificial intelligence by reaching more enterprises that rely on x86 technology to run their IT systems.
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Intel stock had been up 24% this year through Wednesday’s close, but the announcement drove its shares up by another 23% in Thursday afternoon trading.
During a conference call Thursday afternoon to discuss the deal, Nvidia CEO Jensen Huang said Nvidia plans to be a “major customer” for Intel’s Xeon line of server CPUs.
“I think it’s safe to say that the partnership that we’re entering into is going to address some $25-50 billion of annual opportunity,” said Huang.
To date, Nvidia has built its own microprocessors, the Grace CPU, on technology licensed from ARM Holdings, which develops intellectual property used by just about every chip maker in the world.
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Most of the world’s computing can be divided neatly into devices that run some kind of ARM CPU “core,” such as Nvidia’s Grace chip or Apple’s “A-series” silicon for the iPhone, and devices built around Intel’s x86, including PCs and servers from equipment makers who buy Intel and AMD chips.
Did Nvidia sour on ARM?
Some chip-industry observers suggest that Nvidia has soured on the relationship with ARM because ARM, majority-owned by Japanese conglomerate SoftBank Group, has indicated it intends to build its own AI chips, which could compete with Nvidia’s GPU franchise.
More immediately, Nvidia’s enormous success selling AI chips into the cloud data centers of Amazon, Oracle, and other giants has yet to translate into a large volume of sales into corporate data centers, where ARM-based chips have never made much headway.
“For the x86 ecosystem, it’s really unavailable except with server CPUs over PCI Express,” said Huang regarding AI computers such as the NVLink-72, Nvidia’s biggest design for a data center computer.
“The first opportunity is that we can now, with Intel x86 CPU, integrate it directly into NVLink ecosystem and create these rack-scale AI supercomputers.”
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In addition to data center machines, Huang said an integrated CPU-GPU part from Nvidia and Intel will enable laptop computers never before seen.
Custom chips for laptops
“The second thing is there’s 150 million laptops sold per year, and Nvidia’s market is largely targeted squarely at gaming and workstation markets where discrete GPUs are used,” he said. “We’re very successful there, we continue to grow there, and we’re going to continue to grow there. There’s an entire segment of the market where the CPU and the GPU are integrated, and it’s integrated for form factor reasons, maybe it’s for cost reasons, maybe it’s for battery life reasons, all kinds of different reasons. That segment has been largely unaddressed by Nvidia today.”
Intel and Nvidia, continued Huang, are creating “an SoC that fuses two processors. It fuses the CPU and Nvidia’s GPU, RTX GPU, using NVLink. It fuses these two dies into one essentially virtual giant SoC, and that would become essentially a new class of integrated graphics laptops that the world’s never seen before.”
Intel CEO Lip-Bu Tan has promised to turn around years of flagging sales with a wholesale transformation of the company.
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Huang deflected questions about whether Nvidia would become a customer of Intel’s chip foundry — one of the world’s largest factories, but mostly dedicated to making Intel’s own chips.
“We’ve always evaluated Intel’s foundry technology, and we’re going to continue to do that,” said Huang.
Intel’s sales have been in steep decline over several years as its own GPU chips failed to compete effectively with Nvidia, thereby missing the AI wave. Intel has also ceded market share for years to AMD, which has become a more prominent vendor of x86 CPUs to accompany Nvidia GPUs in AI computers.
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Intel CEO Lip-Bu Tan came on board in March, promising a major restructuring to restore Intel to its original profile as a fast-moving startup company. Tan replaced Pat Gelsinger, who media reports say was ousted last year after the Intel board of directors turned sour on his efforts to turn the company around.
Historic collaboration
In Thursday’s briefing with Huang, Tan heaped praise on the Nvidia chief, whom he has known for over 30 years.
“I have to salute him,” said Tan of Huang. “He’s done a fabulous job building that AI platform, driving the whole new market opportunity. I’m so excited to be able to work together with Jensen to build a new era.
“This is a historic collaboration between the two companies,” Tan added, “and I think this is a very big, important milestone. We are proud that Nvidia is an investor in Intel, and thank you for supporting us and trusting us.”
Last month, the US government took a 10% stake in Intel, an unprecedented move for government involvement in a for-profit corporation.
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Nvidia’s Huang said the administration of US president Donald Trump had “no involvement” in its investment in Intel. He added that US commerce secretary Howard Lutnick was “very excited” about the investment.
At Wednesday’s closing price, Intel was valued at $116 billion, making Nvidia’s $5 billion investment worth 4% of the company.
