A fresh wave of speculation is swirling around chipmaker Intel (NASDAQ: INTC) as reports suggest the company may soon land a major foundry deal with none other than Nvidia (NASDAQ: NVDA). If the rumor proves true, it could be a game-changer for Intel’s foundry ambitions, giving the company a significant foothold in manufacturing chips for one of its biggest rivals.
Intel’s Foundry Ambitions Gain Traction
Intel has been heavily investing in its foundry business in recent years. The company poured billions of dollars into building semiconductor factories in Ohio, a move backed by both state funding and financial support from the federal government through the CHIPS Act. These efforts aim to position Intel as a key player in contract manufacturing, competing with industry leaders like Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung.
The latest rumor, first circulated by Timothy Arcuri, a highly-rated UBS analyst, suggests that Intel is close to securing Nvidia as a foundry client. Arcuri’s report notes that the deal is not yet finalized but claims that Intel is “closing in” on the agreement. This potential partnership could be a massive win for Intel, boosting its credibility as a serious foundry contender.
Why Nvidia Matters to Intel
Landing Nvidia as a customer would not only diversify Intel’s revenue stream but also enhance its reputation in the contract chip manufacturing space. Nvidia, the leader in artificial intelligence (AI) chips, has been working with TSMC to produce its high-performance GPUs, which have seen massive demand due to the AI boom. However, if Nvidia were to shift some of its production to Intel, it could signal a major shift in the semiconductor industry’s dynamics.
Intel has already made progress in attracting big-name clients. The company reportedly has deals with Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) to manufacture custom chips. Adding Nvidia to the mix would validate Intel’s foundry capabilities and could encourage other tech giants to follow suit.
Investor Reaction: Cautious Optimism
Investors have taken a cautiously optimistic stance on the news. During Wednesday’s trading session, Intel shares edged up slightly following the rumor, reflecting a hint of optimism among traders. However, skepticism remains, as previous Intel foundry deals have taken time to materialize.
Nvidia’s potential move to partner with Intel also reflects the ongoing supply chain concerns plaguing the semiconductor industry. With growing geopolitical tensions and supply chain disruptions affecting chip production, diversifying manufacturing partnerships could help Nvidia reduce its dependence on TSMC and increase its production flexibility.
Challenges Ahead for Intel
Despite the promising rumor, Intel still faces challenges. The company’s board of directors is reportedly going through changes, with several members planning to step down in 2025. This upcoming shake-up could add uncertainty to Intel’s strategic direction.
Furthermore, Intel’s foundry business needs to prove it can deliver on large-scale, high-performance chip production. While winning over Nvidia would be a huge credibility boost, Intel will still need to demonstrate it can meet the stringent quality and volume requirements that a client of Nvidia’s caliber would demand.
Key Takeaway: A Potential Turning Point for Intel
If Intel manages to secure Nvidia as a foundry client, it could mark a turning point for the company’s manufacturing ambitions. The deal would signal that Intel is making meaningful progress in its goal of becoming a competitive contract chipmaker.
For investors, this potential partnership could be a catalyst for Intel’s stock, which has struggled to keep pace with other chip giants like Nvidia and AMD. However, the deal’s impact will ultimately depend on whether Intel can meet the performance and production standards required by Nvidia and other future clients.
As the semiconductor industry continues to evolve, Intel’s growing foundry business could reshape the competitive landscape, with Nvidia’s involvement serving as a significant endorsement of its capabilities.
