Nvidia: Collaboration with Intel Might Bring Some Goodwill with the US

Key Morningstar Metrics for Nvidia

• Fair Value Estimate: $190.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Very High

Nvidia NVDA and Intel INTC announced a collaboration to jointly develop multiple generations of custom data center and PC products. Nvidia will also invest $5 billion in Intel’s common stock at a price of $23.28 per share.

Why it matters: We view this as a good investment for Nvidia. The company tried to dismiss this angle, but it might be buying some goodwill with the US government (which owns 10% of Intel).

• Nvidia has long paired x86 CPUs from Intel, such as Sapphire Rapids, with its GPU servers. The collaboration extends this relationship with NVLink connectivity. We haven’t expected AMD to gain share here, since AMD offers competing AI products.
• Nvidia’s deal to supply RTX GPU chiplets into Intel’s x86 PC CPU products should boost Nvidia’s non-data center businesses. However, we’re hesitant to declare this a material driver of Nvidia’s future growth.

The bottom line: We maintain our $190 per share fair value estimate for wide-moat Nvidia and retain our Very High Uncertainty Rating. The shares rose about 4% in Sept. 18 trading but still appear modestly undervalued to us, as we see tremendous upside for AI buildouts in the years ahead.

• For Nvidia, we view the $5 billion investment as immaterial and don’t believe it will alter the company’s core business plans. Nvidia reinforced its commitment to Arm-based Grace CPUs, for example, and won’t shift fully toward Intel x86 CPUs.

Between the lines: Importantly, Nvidia gave no indication that it will use Intel 14A or otherwise shift significant portions of manufacturing to Intel Foundry. We doubt the $5 billion is meaningful enough to essentially force Nvidia to use Intel, either for core products or even for the chips in collaboration.