Nvidia (NVDA +2.02%) has just made a move that clearly is great news for Intel (INTC +2.65%). The artificial intelligence (AI) chip powerhouse this week committed to investing $5 billion in the common stock of Intel, its beleaguered rival.
As part of the deal, Nvidia will integrate Intel's chips into its AI infrastructure platforms. AI is an area where Intel has fallen behind, so this deal could mark a key turnaround for the company.
Intel is an expert in central processing units (CPUs), the main processors in today's computers, and Nvidia will harness the power of the Intel x86 CPU architecture -- combined with its own high-powered graphics processing units (GPUs) -- to drive AI tasks. Together, we're talking about the best CPUs and GPUs on the market, so the resulting platform should be a winning one.
This investment is particularly positive for Intel, since the company has struggled to keep up as the AI boom accelerated, while its revenue was declining and profit shifting to a loss in the latest fiscal year. And the stock has followed, dropping 38% over the past five years.
But Nvidia's latest move isn't only a positive for Intel. My prediction is that this could be the catalyst for Nvidia's next trillion-dollar milestone.
Image source: Getty Images.
Nvidia, since the start of the AI boom
So, a quick look at Nvidia's story since the AI boom started. The company was first to market with high-performance GPUs, and that helped it build a fantastic reputation among AI customers -- and go on to grow revenue by the double and triple digits.
Nvidia didn't stick to GPUs only, though, and instead expanded into a full range of related products, from networking solutions to enterprise software. All of this has helped its shares soar 1,300% over five years.
NASDAQ: NVDA
Key Data Points
Though Nvidia is an expert in GPU design, CPUs haven't been the company's specialty, and here, it's relied on the technology of Arm Holdings. The agreement with Intel won't change Nvidia's work with Arm, but in this new deal, Nvidia's platform also will support Intel CPUs. And Intel will integrate Nvidia RTX GPU chiplets into its personal computing (PC) systems.
The first positive for Nvidia is that it will offer Intel's strengths in CPUs, a move that should supercharge its already leading AI offerings, and the agreement will expand Nvidia's presence in the PC market. This is for a small price, considering Nvidia generated more than $130 billion in revenue last year and today has more than $56 billion in cash.
Nvidia and President Trump
But the biggest positive for Nvidia in this agreement may be how it impacts the company's relationships in Washington. President Donald Trump has favored investing in America, and the government even recently took a 10% stake in Intel. It's likely the Trump administration will appreciate Nvidia's move, and that could make the government more supportive of subjects that are important to the AI chip leader.
For example, two challenges Nvidia has faced in recent months -- and they involve government decisions -- are the potential for tariffs on imported chips and parts, and a U.S. restriction on sales of chips to China.
The government has delivered good news in those areas in recent months: Companies that invest in the U.S. won't pay tariffs on the importation of chips, and the U.S. has agreed to grant Nvidia licenses to sell chips to China. But these issues aren't completely settled, and Nvidia may at any point feel an impact from a decision in Washington on its business.
Supporting AI in the U.S.
Still, the Trump administration may view with a favorable eye Nvidia's move to, like the government, invest in Intel and strengthen its commitment to AI development in the U.S. And that could spur the government to show flexibility when dealing with AI matters. The bottom line is: Nvidia has taken steps to support AI in the U.S., and the government may consider this when making decisions.
A few months ago, Nvidia reached $4 trillion in market cap, making it the first to ever do this -- and crowning it as the world's biggest company. From today's level, a 17% increase in the stock price would bring the company to $5 trillion.
My prediction is that all of the positive points I've mentioned from the Intel deal could serve as the catalyst to propel Nvidia to this next trillion-dollar milestone.
