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Will Nvidia select Intel for its GPU fabrication process?


Will Nvidia select Intel for its GPU fabrication process? By Investing.com

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AuthorScott KanowskyStock Markets

Published Mar 12, 2024 07:49AM ET

© Reuters

Investing.com — Nvidia (NASDAQ:NVDA) will “inevitably” select U.S. chip group Intel (NASDAQ:INTC) to make its high-end semiconductors optimized for artificial intelligence, analysts at Global Equities Research have argued.

Why analysts believe Intel may be the best option for Nvidia

The analysts said in a note to clients that future AI graphics processors designed by Nvidia will only be constructed “efficiently” using Intel’s cutting-edge “18A” manufacturing process.

The 18A is widely seen as an approach to chipmaking that will shrink the size of processors and help them consume less power. Intel is banking on the technology to attract customers and ward off competition from Taiwan’s TSMC (TW:2330) and South Korea’s Samsung (KS:005930), both of whom are currently harnessing their own manufacturing capabilities to produce next-generation chips.

According to a recent report in Taiwanese newspaper United Daily News, Nvidia has decided to use Intel to provide advanced packaging services in a bid to meet soaring demand for its AI chips. Neither Nvidia nor Intel have confirmed these rumors.

The impact on Intel stock

Intel has previously only said that it will begin to make semiconductors for Microsoft (NASDAQ:MSFT), which Chief Executive Pat Gelsinger touted in February as a deal that will “rebuild western manufacturing at scale.”

The Microsoft agreement, which will see the 18A node employed to produce the tech giant’s chips, marked a key step forward in Intel’s ongoing push to grow its foundry business. Demand for this service, which builds chips designed by other companies, has spiked as more firms race to develop their own AI-fueled applications.

Gelsinger, who has helmed the turnaround effort since he took over at Intel three years ago, has even stated that he wants to manufacture “every AI chip in the industry” through the foundry unit.

Intel has given itself the goal of making sure that half of the world’s AI semiconductors are manufactured in either the U.S. or Europe in a decade, up from around a fifth today. Currently, much of this production in based in Asia, especially in Taiwan.

Analysts at Northland Capital Markets referred to Intel as a “pick-and-shovel” company for AI chips, in a reference to the tools needed during the California Gold Rush in the 19th century.

“Manufacturing is [Intel]’s real franchise, and it is on track to recapture process technology leadership […], making it a critical AI [f]ranchise,” the analysts said in a note on Monday. “There is a lot of money chasing AI and chip manufacturing. Only TSMC, [Intel], and maybe Samsung can manufacture a competitive AI chip.”

Meanwhile, the Biden administration has signaled that it views Intel as America’s “champion chip company” during a time when semiconductor manufacturing has become a major source of geopolitical tensions. Lawmakers have discussed an incentive package for Intel that includes more than $10 billion in grants and loans as part of a larger plan to bring chipmaking back to the U.S., according to a Bloomberg News report citing people familiar with the matter.

Despite the enthusiasm around its foundry operations, Intel shares have dipped by 6% so far this year as the firm continues to face uncertain demand for its core business: making chips for traditional servers and personal computers.

In January, Intel’s current-quarter revenue forecast missed market projections by over $2 billion. However, Gelsinger stated at the time that the company still has $2 billion in orders for its AI chips and predicted that sales would improve later in 2024.

“Momentum and excitement around new products and businesses remain strong as we head into the year and will grow stronger as the year progresses,” he said in a call with analysts.

Discover more about AI stocks

Looking to assess the performance of other AI stocks? Our dedicated page offers a comprehensive list of alternative AI companies spanning various industries and technologies. Assess the performance across popular AI stocks including Nvidia (Learn more: What is Nvidia?)

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Will Nvidia select Intel for its GPU fabrication process?

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