A Win for Headlines, But Not for the Core Issue
When Nvidia (NVDA) announced its $5 billion investment in Intel (INTC), Wall Street applauded. Intel’s stock jumped nearly 30% in a single day, as investors saw the deal as validation from the world’s most valuable chipmaker. But beyond the headline-grabbing stake, the move doesn’t address Intel’s deepest structural problem: the ongoing struggles of its contract manufacturing arm, Intel Foundry Services (IFS).
The Nvidia deal brings strategic synergies, but Intel’s foundry business—the linchpin of U.S. semiconductor independence—continues to bleed billions. Analysts say that unless Intel finds a way to fix its manufacturing model, the company risks being permanently overshadowed by Taiwan’s TSMC (TSM) and South Korea’s Samsung in the global chip race.
Nvidia’s Stake: What It Really Means
The agreement gives Nvidia a 4% share in Intel and sets up collaboration:
- Nvidia will use Intel CPUs in its AI data center systems.
- Intel will integrate Nvidia’s AI technology into chips designed for PCs.
This partnership positions Intel’s CPU products closer to the AI boom, while Nvidia gains more diversification across compute platforms. However, crucially, the deal excludes any direct commitment to Intel’s foundry business. Instead, Nvidia will continue to rely heavily on TSMC for the most advanced manufacturing.
The Heart of Intel’s Struggle: Foundry Losses
Intel launched Intel Foundry Services (IFS) in 2021 with ambitions to become a global competitor to TSMC, opening its fabs to outside customers. Former CEO Pat Gelsinger pitched it as the revival strategy to restore Intel’s dominance.
But the numbers tell a harsher story:
- 2023 losses: $7 billion.
- 2024 losses: $13 billion.
- Market reaction: Intel’s shares plunged 60% last year.
- Leadership fallout: Gelsinger was ousted by the board in December 2024.
The business continues to lack meaningful customer commitments. Analysts expect IFS to bleed cash through at least 2027, creating a drag on Intel’s broader performance.
The Strategic Stakes: National Security and Supply Chains
Intel isn’t just another tech company—it’s the only leading-edge chipmaker in the U.S. That gives Washington a vested interest in keeping IFS alive. With China’s ambitions toward Taiwan casting uncertainty on TSMC’s long-term stability, the U.S. cannot afford to see Intel’s foundry business collapse.
The U.S. government has already taken a 10% stake in Intel to shore up the company. For defense and critical infrastructure, Intel’s survival is tied to national security.
Why Nvidia’s Move Doesn’t Solve It
Some analysts expected Nvidia’s investment to include a foundry contract, shifting some of its GPU production to Intel fabs. That would have been a lifeline for IFS. But no such agreement was announced. Instead, Nvidia and Intel will continue to rely on TSMC for manufacturing of next-generation chips.
Moor Insights & Strategy analyst Anshel Sag summed it up:
“I was expecting that Nvidia was going to announce some sort of contract manufacturing deal with Intel, with U.S. government involvement. The absence of that was surprising.”
This raises the question: Was Nvidia’s investment more symbolic than practical for IFS?
Intel’s Dilemma: Sell or Sustain?
Wall Street is split on whether Intel should sell its foundry business or double down on it.
- Sell it? Some argue divesting would stop the bleeding and allow Intel to focus solely on product design.
- Keep it? Others warn that without IFS, Intel’s economies of scale shrink, making its own chip production costlier.
For now, Intel is stuck in between—too invested to exit, but too unprofitable to convince investors it’s viable.
Possible Future Scenarios
- Nvidia as a Foundry Customer: Even if not immediate, Nvidia might eventually allocate small, “token” workloads to IFS to diversify its supply chain.
- Government Pressure: Washington may push for major U.S. tech firms to shift some orders to Intel as part of its semiconductor independence strategy.
- AI Demand Lifeline: If Intel can retool its fabs to cater to AI accelerators and specialty chips, it could carve out a niche in the booming AI hardware market.
Broader Context: The AI Hype vs. Manufacturing Reality
The semiconductor industry remains cyclical. While AI has extended this upcycle, demand for traditional products—smartphones, PCs, and non-AI chips—is still weak. Intel sits uncomfortably in the middle: exposed to cyclical swings while still struggling to win in the high-margin AI race.
Final Thoughts: A Stake in the Future, But Not a Cure
Intel’s partnership with Nvidia may boost credibility and open doors for collaboration, but it’s not a cure for the foundry problem. Unless IFS attracts meaningful customers and scales profitably, Intel risks remaining dependent on government lifelines and investor optimism rather than true competitive strength.
For now, Nvidia’s $5 billion stake is a strong headline. But headlines don’t build fabs, win contracts, or fix $13 billion losses. The real test for Intel lies ahead: transforming IFS from a money pit into the foundation of U.S. semiconductor resilience.