An Intel-NVIDIA Foundry Relationship Now Makes a Lot of Sense

NVIDIA's graphics processors seem ideal candidates for Intel's foundry business.

Jun 1, 2014 at 10:00AM

A long time ago, NVIDIA (NASDAQ:NVDA) CEO Jen-Hsun Huang seemed to be very interested in having Intel (NASDAQ:INTC) build its Tegra chips (and indeed, chips for all of the mobile companies). While Intel would most likely avoid such business as it would threaten its Core and Atom processors, NVIDIA's discrete graphics business would certainly be a fantastic candidate for Intel's Custom Foundry.

GPUs: A near-perfect fit
If you look at NVIDIA's highest-end GK110 part (known colloquially as "big Kepler"), you'll notice that it is a 7.1 billion transistor beast with a die size that weighs in at 550 square millimeters. These chips also sell for hundreds of dollars and with better performance, the company can command a premium. With Intel's transistor performance lead, its density lead, and its reputation for having some of the best manufacturing yields (that is, how many chips built actually work on a given wafer) in the industry, this could be a beautiful partnership.

From a strategic perspective, if NVIDIA were able to build these graphics chips at Intel, this would completely tip the scales further in what has already been a pretty lopsided duopoly in NVIDIA's favor. NVIDIA already has the marketing/brand down, extremely good hardware designs, and some of the world's best graphics software teams in-house. Augment that with a manufacturing advantage, and it's very difficult to see how rival Advanced Micro Devices (NYSE: AMD) could compete on performance, power, or -- frankly -- cost.

But what's the downside?
While Intel does not today build discrete graphics cards (and probably has no interest in doing so), it is competing head-to-head with NVIDIA's GPUs (branded Tesla) in the high-performance computing space with its own Xeon Phi. By giving NVIDIA access to its latest and greatest manufacturing technology, Intel neutralizes what is probably its biggest competitive edge against Tesla. However, if we step back for a moment, we realize the following:

  • NVIDIA's Tesla business is on the order of a few hundred million dollars per year and capturing it entirely via Xeon Phi would be more of a philosophical victory rather than a financial one.
  • Capturing the entirety of NVIDIA's high-end discrete business would more or less deprive TSMC (NYSE:TSM) -- Intel's real long-term enemy -- of all of those leading-edge wafer starts, which is a much more critical strategic objective than winning fairly niche high-performance computing accelerator card sockets.

The next potential point of contention would be NVIDIA's Tegra business. It would be awfully weird for NVIDIA to have to build its Tegra processors over at TSMC while its big discrete GPUs get preferential treatment. The problem here is that if Intel were to do a Rockchip-like deal with NVIDIA, the latter company has enough graphics IP (among others) chops to really deal some damage to Intel's higher-end Atom line and even parts of the Core line with an X86-based Tegra. 

Foolish bottom line
While these thoughts are, admittedly, highly speculative, they are also not impossible. Intel's recent willingness to open up its factories and given how well suited big, performance-sensitive graphics processors are to Intel's manufacturing strengths make this an interesting consideration, but as is always the case in business, the devil's in the details.

Leaked: Apple's next smart device (warning: it may shock you)
Apple recently recruited a secret-development Dream Team to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out... and some early viewers are even claiming its everyday impact could trump the iPod, iPhone, AND the iPad. In fact, ABI Research predicts 485 million of these type of devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Ashraf Eassa owns shares of Intel. The Motley Fool recommends and owns shares of Intel. It recommends NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers