NVIDIA Acquires 5% Stake in Intel, Boosting Stocks 22.77%

In a surprising move that sent ripples through the semiconductor industry, NVIDIA Corporation (NVDA.US) announced its acquisition of a 5% stake in Intel Corporation (INTC.US). This development has captured the attention of Wall Street and positioned the U.S. government as the primary beneficiary of the transaction.

The U.S. federal government had previously purchased 4.33 billion shares of Intel at $20.47 per share last month, totaling an investment of approximately $89 billion. By the end of Thursday's trading session, Intel's stock price had surged to $32.38 before closing at $30.57, marking a single-day increase of 22.77%. This rapid appreciation means that within just one month, the government's paper profit has neared 50%, or $44 billion, with the holding value exceeding $130 billion.

NVIDIA's stock also saw an uptick following the announcement, closing at $176.24 with a 3.49% increase. This boost contributed to the rise of major U.S. stock indices, with the S&P 500 gaining 0.48% and the Nasdaq Composite rising by 0.94%.

Analysts note that while the returns may not match those from the U.S. Department of Defense's investment in MP Materials, the strategic implications are substantial. The Department of Defense had acquired approximately 25 million shares of MP Materials at $30 per share in July, aiming to secure the supply of rare earth magnets for the military. This investment has since doubled in value, yielding nearly $10 billion in paper profits.

In recent years, the U.S. government has increasingly invested directly in key industries, a trend that has left investors with mixed feelings. Traditionally, government interventions were limited to bailing out companies in severe financial distress. However, this approach is evolving, with government officials now considering direct ownership stakes in defense contractors. U.S. Commerce Secretary Gina Raimondo has publicly advocated for the government to hold shares in defense contractors, given that the Pentagon is their largest customer.

The acquisition by NVIDIA is seen as a strategic move that could enhance its relationship with the U.S. government, particularly under the administration of Donald Trump. However, the transaction is more than just a political maneuver. It represents a significant shift in the global semiconductor industry, as the world adapts to the transformative impact of artificial intelligence.

Industry experts believe that the AI revolution is driving a new wave of consolidation in the global chip supply chain. By bringing in both the government and NVIDIA as major shareholders, Intel stands to gain dual advantages in terms of capital and market positioning. This could accelerate research and development in AI chips and expand production capacity. For NVIDIA, investing in Intel strengthens its strategic influence in the AI hardware supply chain and may secure policy support.

The collaboration between NVIDIA and Intel is poised to reshape the landscape of the semiconductor industry, with both companies leveraging their strengths to navigate the rapidly evolving technological landscape. This strategic partnership not only enhances their competitive edge but also aligns with the broader goals of the U.S. government in securing critical technologies and industries.