Why Intel Rallied in September

• Intel blasted higher in September on the back of Nvidia’s $5 billion investment and announced product partnership.

• The collaboration should go a long way toward stabilizing and perhaps growing Intel’s market share in PCs and servers.

• Despite the dilution, Nvidia’s vote of confidence led the stock to surge.

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Shares of Intel (NASDAQ: INTC) rallied 37.8% in September, according to data from S&P Global Market Intelligence.

Intel had already experienced a momentous month in August after the U.S. government converted its CHIPS Act grant money into roughly a 9% equity stake, while Japanese tech giant Softbank invested another $2 billion.

Those investments, while notable, were dwarfed in significance by last month’s $5 billion investment from AI leader Nvidia (NASDAQ: NVDA), which also came along with an announcement of two key product partnerships.

Attracting the investment of arguably the world’s most important AI company sent beaten-down Intel’s stock soaring in September.

There were three major components to the Nvidia-Intel announcement: two product partnerships, along with Nvidia’s $5 billion investment in Intel stock at $23.28 per share — good for about a 4% ownership stake.

On the product-level partnership, Intel will integrate its data center CPUs more tightly with Nvidia’s leading AI GPU server ecosystem, while Nvidia will more closely integrate its graphics GPU technology with Intel’s leading CPU architecture for PCs, where Intel still holds a large market share.

In order to make fully integrated AI servers, which still require a CPU, Nvidia has developed its own internally designed “Grace” CPUs based on the Arm Holdings architecture in recent years. However, Arm CPUs are generally known for their power efficiency, not performance. Meanwhile, most enterprise data center servers are still tied to the x86 CPU architecture, not Arm. As such, Intel’s performance-optimized Granite Rapids Xeon 6 CPU, which came out last year, became the reference design as the “host” CPU in Nvidia’s new DGX B300 server systems.

The two companies will now bring Nvidia’s GPU and Intel’s x86 CPU architectures even closer together, with Intel giving Nvidia the ability to customize its own CPU design on Intel’s x86 CPU architecture for future AI systems.

And while Nvidia dominates AI servers, Intel, despite having lost its near-monopoly from a decade ago, still commands over 76% of the consumer PC market. Nvidia already sells discrete RTX graphics chips to the high-end gaming PC market, but has been somewhat left out of a large part of the PC market that demands close integration of graphics and central processing units on the same system-on-chip (SOC).