Intel (INTC +1.15%) stock soared 25.1% through 9:55 a.m. ET Thursday, and it's no mystery why.
This morning, Intel announced that Nvidia (NVDA 1.56%) will invest $5 billion in Intel and help its former rival to "develop AI infrastructure and personal computing products" going forward.
Image source: Getty Images.
Intel + Nvidia = a big stock surge
This deal comes in two parts. First, Nvidia will buy $5 billion worth of Intel stock at $23.28 per share. That's a 6.5% discount to Intel's closing share price Wednesday, before the partnership announcement was made. It's also more than a 25% discount to Intel's share price today.
These facts alone make today's news surprising. Nvidia's getting a sweet deal on Intel stock, but it's Intel's shares that are skyrocketing, while Nvidia shares are up only 2%.
But now let's look at the second part. Nvidia and Intel are planning "to jointly develop multiple generations of custom data center and PC products." They'll be "seamlessly connecting NVIDIA and Intel architectures using NVIDIA NVLink" to marry Nvidia's expertise in artificial intelligence with Intel's leading position in the personal computer market. More than that, Intel will actually be building x86 system-on-chips (SOCs) that integrate Nvidia RTX GPU chiplets.
Translation: Intel just became one of Nvidia's biggest customers.
NASDAQ: INTC
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Is Intel stock a buy?
Coming on the heels of the Trump administration's taking a 10% interest in Intel, I understand why investors think this is great news for Intel. The semiconductor company's future looks a lot more secure today than it did just one month ago.
It really seems to me, though, that Nvidia is getting the most out of this deal -- shoehorning itself into the Trump/Intel relationship, and getting a great price on Intel stock as part of the bargain.
