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Nvidia ( NVDA ) invests $5 billion in Intel ( INTC ) for a 4% stake

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Intel-Nvidia deal boosts Intel's ( INTC ) chip manufacturing

prospects

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AMD faces challenges as Intel ( INTC ) and Nvidia ( NVDA ) collaborate

By Stephen Nellis

SAN FRANCISCO, Sept 18 (Reuters) - Nvidia's ( NVDA )

deal with Intel ( INTC ) could put the struggling chipmaker'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 ( NVDA ) on Thursday invested $5 billion in Intel ( INTC ) 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 ( INTC ) central processors

and Nvidia's ( NVDA ) artificial intelligence and graphics chips with a

speedy and proprietary Nvidia ( NVDA ) connection technology called

NVLink.

This could give Intel ( INTC ) a leg up against rivals such as Advanced

Micro Devices ( AMD ) because its chips will be attached to

Nvidia's ( NVDA ) 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 ( INTC ) 14A manufacturing process slated for 2027. Analysts have

said this process is critical to its success, and Intel ( INTC ) 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 ( NVDA ) 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 ( INTC ) manufacturing arm.

Intel Foundry will supply central processors for the joint

products and package chips from Nvidia ( NVDA ) for some of them, as part

of the deal. Engineers from both companies will work together to

turn Nvidia's ( NVDA ) technology into a physical chip made at Intel ( INTC ).

This is significant for both because Intel ( INTC ) does not always

use its own factories to craft its own chip design, often

relying on TSMC, just as Nvidia ( NVDA ) does.

But if Intel ( INTC ) supplies the chips for the joint products and

they prove to be popular, the partnership could help provide the

production volumes that Intel ( INTC ) needs to make its manufacturing

investments viable, analysts said.

"It gives me a higher degree of confidence that 14A

continues, at which point Intel ( INTC ) should have very good returns"

on its 14A investments, said Ben Bajarin, CEO of technology

consulting firm Creative Strategies.

For Nvidia ( NVDA ), the deal also means better access to a large

swath of business and government customers with decades of

software written for Intel's ( INTC ) chips. The primary loser is AMD,

which designs different types of chips that compete with Nvidia ( NVDA )

and Intel ( INTC ) in their respective markets.

"Having two major competitors combining their efforts is not

exactly a positive outcome for AMD," Gold wrote.