NVIDIA's $5 billion investment, can it turn around the fate of the former chip giant Intel?
“Probably not.”
On September 18, The Wall Street Journal published a commentary stating that NVIDIA's $5 billion investment in Intel and the chip development agreement has brought much-needed cash flow to Intel and brought it closer to the core of the AI boom. However, these are merely &#34;tactical victories,&#34; and what Intel truly needs is &#34;structural reform.&#34;
<blockquote>
Intel needs to split itself up.
</blockquote>
The article pointed out that in the competition for advanced chip manufacturing, Intel has long fallen behind TSMC. TSMC has become the world's largest and most advanced chip manufacturer by focusing on contract manufacturing semiconductors for other companies. In contrast, Intel has chosen the opposite path, insisting on integrating chip design and manufacturing, even as the industry trend has clearly shifted towards specialization.
<h2>The Dilemma of Contract Manufacturing</h2>
Intel's contract manufacturing business is facing severe challenges. According to reports, since former CEO Pat Gelsinger launched the contract manufacturing business in 2021, this division, which encompasses all of Intel's manufacturing operations, has struggled to attract external customers.
Financial data shows that Intel's contract manufacturing business generated $4.4 billion in revenue in the latest quarter, but primarily from internal Intel sources, and recorded an operating loss of about $3.2 billion. This performance highlights Intel's disadvantages in competing with specialized foundries like TSMC and Samsung.
In a press call on Thursday, NVIDIA CEO Jensen Huang stated that the company has been evaluating Intel's contract services, but when asked whether new PC and data center chips would help establish that business, he chose to evade the question. Jensen Huang praised Intel's advanced chip packaging technology, suggesting that new chips might utilize this technology, but the article commented that this would have limited impact on the overall push for Intel's contract manufacturing business.
<h2>Splitting Up May Be the Only Way Out</h2>
The article further emphasized that NVIDIA and Intel's avoidance of the manufacturing business issue further confirms that splitting up is Intel's best option and suggests that Intel be divided into two independent entities: a chip design company and a manufacturing company.
The commentary noted that this structure would allow Intel's various parts to collaborate better with companies like NVIDIA, making cooperation more rational. If Intel were to split, NVIDIA could collaborate with Intel's chip design team to develop CPUs for data centers and personal computers, which could then be manufactured at TSMC, Samsung, or the split-off Intel factories, without concerns about Intel's own manufacturing interests.
Moreover, NVIDIA and other chip design companies, such as Qualcomm and AMD, would be more willing to outsource chip production to Intel, knowing that the split-off Intel manufacturing division would not compete with them. The article even speculated that NVIDIA's willingness to collaborate closely with Intel now may be because Intel has lost its competitive edge in the lucrative AI chip sector dominated by NVIDIA
The spin-off will also allow investors—including the U.S. government, which recently purchased nearly 10% of Intel's shares—to choose to invest in Intel's chip manufacturing or chip design business, rather than bearing the risks of both simultaneously.
<h2>Spin-off Prospects: Challenges and Opportunities</h2>
Despite the numerous difficulties faced by the spin-off of Intel's factories, including financial losses and the complexity of related financing transactions, the article argues that this is a necessary step. It emphasizes that Intel's factories must be forced to operate independently in order to compete with TSMC and regain their status as a significant chip manufacturing force—something that may require support from NVIDIA, other customers, and the government.
One optimistic possibility is that NVIDIA's investment could trigger further investments from other potential clients of Intel's foundry business, providing the necessary funds for Intel to build expensive advanced chip factories and placing the spun-off foundry business in a better financial position. This is precisely the type of investment that Intel urgently needs.
The commentary concludes that this is exactly the type of investment Intel desperately requires. Only through fundamental business restructuring can Intel truly regain its leadership position in the chip industry, rather than relying solely on short-term boosts from external investments

NVDA

INTC

NVDL

07788

07388

NVDY

NVDD

NVDX

NVDQ

Despite NVIDIA's $5 billion investment bringing funding and AI collaboration opportunities for Intel, media commentary suggests that this is merely a tactical victory and cannot turn the tide. What Intel truly needs is structural reform—completely separating its chip design and manufacturing operations into two independent entities. The spun-off Intel foundry business may find it easier to attract external clients like NVIDIA and secure more investments, thereby regaining competitiveness in the fiercely competitive foundry market

- Nvidia's $5 billion investment in Intel may provide short-term cash flow but is insufficient for Intel's long-term recovery.  
- The article argues that Intel needs structural changes, including a split into separate design and manufacturing entities, to compete effectively with TSMC and Samsung.  
- Despite challenges, such a split could attract more clients to Intel's manufacturing services and restore its position in the semiconductor industry.

Can NVIDIA save Intel?