The Biggest Bombshell in Semiconductors in Years:-
The biggest bombshells to hit the semiconductor industry in years. Nvidia and Intel, historic rivals, have just announced a massive collaboration. And this is not a small deal. About joint product development and a $5 billion investment from Nvidia directly into Intel stock. Of course, this news sent Intel stock soaring 25% today. But what does it all actually mean? Who wins? who loses and how does it impact key stocks like AMD, ARM, Qualcomm, and the foundry king, Taiwan Semiconductor.
Two-Pronged Strategy: Data Centers + Personal Computing:-
The facts is directly from Nvidia’s newsroom. Nvidia and Intel is developing some AI infrastructure and personal computing products. So, this partnership is a two-pronged attack. data centers as well as personal computers.
AI Data Center Focus: Intel CPUs, Not GPUs:-
About AI infrastructure and data centers. Of course, that’s the heart and soul of Nvidia’s business, and most of that is going to be GPUs. Now, this partnership is specific to custom x86 CPUs, not GPUs that Nvidia will integrate into its AI infrastructure platforms and offer to the market. So, it’s important to understand these are not offthe-shelf chips. In addition to AI data center also partnering for personal computing and this is a big deal that is going to impact several stocks that we’ll talk about later.
PC Market Shakeup: Nvidia + Intel vs. AMD:-
Intel is going to build an offer to the market x86 system on chips or SOC’s that integrate Nvidia RTX GPU chiplets. There’s no question that this is a direct assault to high performance integrated graphics. And what they’re really doing is they’re creating an entire new class of powerful PCs. So we think of AI and gaming PCs. Now, to seal the deal, Nvidia is also investing $5 billion in Intel’s common stock, paying $23.28 a share. Jensen Wong seems like he has all of the cards. All the different companies that Nvidia is investing in, and these companies are just crushing it. So, Nvidia is growing like crazy. And on top of it, feels like anything they invest in terms of gold.
Nvidia Buys 4.9% Stake in Intel:_
So, if you do the math on this, it’s about a 4.9% stake in the total company. And of course, don’t forget the US government just invested $8.9 billion into Intel on top of this. Now, this hundred billion number here is important. It says as the company builds upon its more than a hundred billion expansion of resilient semiconductor supply chain. And the reality is, even though the government just invested almost $9 billion and Nvidia invested $5 billion, there’s been other investments as well, Intel still needs more money.
To compete with Taiwan Semiconductor is very expensive and they’re going to need more cash. For Intel, this is a monumental gamechanging deal. For years, Intel has been seen and really has been a lagard in the AI space. Dan Ies from Wedbush, he calls this a gamecher moment for Intel.
A Game-Changer for Intel’s Future in AI:-
This is a gamechanger deal for Intel as it now brings them front and center into the AI game. While not announcing a specific timeline when these parts go on sale, this announcement does impact the individual growth strategies of Nvidia and Intel moving forward. And we’re talking about 3 trillion to 4 trillion in AI infrastructure spend by the end of the decade. So there is a lot of money here to go around, but this move will definitely help, especially sentiment for investors, which is very important. And you’re going to see the stock probably continue to go higher. It gives validation of their technology as well as their foundry, which has been a really important issue for investors. Getting this guaranteed high volume customer from Nvidia. Well, that’s going to help them compete with the Taiwan semiconductor in Samsung. It also aligns perfectly with what the government’s trying to accomplish. We’re trying to get semiconductor manufacturing on US soil.
Supply Chain Strategy: Chips on U.S. Soil:-
About this since August of 2020. Semiconductors, the new oil, and this is showing you just how important semiconductors truly are. We’re trying to get away from relying 100% on Taiwan Semiconductor. So, a combination of Taiwan Semiconductor actually bringing fabs to Arizona on US soil, plus beefing up Intel’s capabilities. Well, it’s just good for the United States.” Because of course Beijing, China stepping up efforts to boost semiconductor independence and compete with the United States. Semiconductors, the new oil, the global arms race is on.
Strategic Masterstroke by Nvidia:-
For Nvidia, this is what would call a strategic master stroke. They’re securing a dedicated US-based supply of high-performance x86 CPUs built custom for their AI systems. This is going to reduce supply chain vulnerabilities and it gives them more control over their ecosystem. When you really think about Nvidia’s strategic edge, it has to do with its software capabilities and if they can continue to deeply wind this software into their hardware, the GPUs with the CUDA software. And this is exactly what they’re doing with these custom Intel chips. Believe it or not, that’s making Nvidia’s moat even harder to penetrate. Where is Nvidia stock headed from here? Think this is nothing but positive news. You guys know the drill. April got down to $86.62, 62 ripped all the way up here to $185. Pulled back. Now it’s at $176. Nice pop today with this news. Your current R3 Fibonacci is $191.50. The previous is $22.70. This stock will go to $200, Believe, in 2025. And you’re going to see $225 and $250 sometime between now and the next 12 months.
And there’s really only one company in the world that can produce these at scale, and that’s Taiwan Semiconductor. When you think of 4nmter, and 3nmter, in 2n, Taiwan Semiconductor really has a monopoly when you think of who can actually produce these chips, a foundry. So, just to be clear, Intel is making CPUs, not GPUs. Taiwan Semiconductor is still the leader with GPUs, and it doesn’t really impact them much at all. So this is where it gets really interesting for some other names like an AMD or a Qualcomm. Let’s start with the company that’s impacted most, and that’s going to be AMD. Whether you like it or not, if you really understand what this is and what they’re trying to accomplish, this is a direct attack on AMD’s core markets. This is definitely a direct attack at the data center CPUs, but also those PCs. And here’s the thing, there’s so much total addressable market. There’s so many fish in the sea, so much money to be spent and made.
AMD: The Real Loser?:-
AMD is still going to be a player. And the thought process here is that the growth is accelerating so much that by the time Intel gets ramped up, it really kind of equals itself out. Now with that said, you understand that the stock market can be very fickle and sentiment matters. If analysts get a hold of this and start downgrading AMD, you can easily see the stock get absolutely hammered. So if you look at the last few years, ARMbased chips like Qualcomm, the new Snapdragon Elite chips, they’ve been making serious inroads into the PC market and really competing directly at that dominance from the x86 chips. This Intel Nvidia partnership is a powerful counter move to that. This will more than likely impact the revenues for ARM. And it could even impact some of the momentum that Qualcomm has with Snapdragon. We’re going to have to keep a finger on the pulse, make sure we understand the developments that are happening here. Now, earlier we talked about Simon Semiconductor, and kind of blew it off like there’s no impact at all. There is some short-term impact.
They’re going to lose business for those Nvidia CPUs. But the golden goose here, guys, is Nvidia’s GPUs and Taiwan Semiconductor has that in the bag. In the long run, beefing up Intel’s capabilities really helps the entire global market. So, what’s happening now? This comes down to the AI arms race and geopolitics. When you see the US government investing almost $9 billion in a company, you know that it’s going to be for a strategic reason.
Final Thoughts: Who Wins in the Long Run?:-
This is a critical push to bring semiconductor manufacturing foundaries back to US soil. We want to reduce our reliance to Asian countries such as Taiwan. To wrap it up, this is a massive win for Intel. It validates its foundry ambitions and it’s going in the right direction. Think Intel has a long ways to go. I’m not buying the stock, at least not quite yet, but think they’re doing all the right things. And if you’re invested in Intel, you should be very happy. This is also a win for Nvidia and its strategic supply chain. Taiwan Semiconductor TSMC. It’s not losing its high-end GPU business. It’s going to be just fine. This is a major threat though to AMD, really to its entire product stack. CPUs for both PCs, gaming PCs, as well as the AI data center. This also could impact ARM and other businesses like Qualcomm, fabulous semiconductor companies that are using ARM’s IP cores that compete against x86. So, you tell me, what are your thoughts on this mega deal? Are you selling your AMD stock? Are you buying Intel stock for the first time? And who do you think comes out on top in the long run?Think it’s clear to most people, Nvidia.