It feels like the chipmakers powering the AI boom are busier than former Love Island contestants lining up brand deals before their 15 minutes of fame run out.
This week brought a slew of news from the semiconductor industry, but perhaps the biggest development of all came today: Nvidia just gave Intel a serious lifeline, investing $5 billion in the company to develop chips together for PCs and data centers. Intel soared 22.77% on the news.
The art of the deal? Nvidia’s partnership arrives just weeks after the US government took a 10% stake in Intel. After today’s rally, the government’s stake is now worth roughly $14 billion—a nearly $5 billion gain since the US became an Intel shareholder.
Nvidia’s investment and the market’s reaction was just another example of how dominant the company has become, argued Wedbush analyst Dan Ives in a note today. “The chip landscape remains NVDA’s world with everybody else paying rent as more sovereigns and enterprises wait in line for the most advanced chips in the world,” wrote Ives. “Today's announcement further strengthens the US lead in the AI Arms Race against China as Intel now goes from a laggard to a catalyst.”
Nvidia rose 3.49% today.
The race isn’t over yet
While the US works to tighten its grip on the AI market, China is working hard to break it.
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Huawei Technologies just revealed its multiyear plan to grow into a formidable competitor to Nvidia, laying out a slew of new products such as memory chips and AI accelerators in a presentation this morning.
Remember DeepSeek, the Chinese startup that handed Silicon Valley a rare L last year when it revealed its LLM can do what US bots can do at a fraction of the cost? Today, the company revealed the price tag of its newest generative AI chatbot: a measly $294,000, or just a fraction of what the Magnificent Seven spent to build their own large language models.
Speaking of spending, Chinese tech behemoths Alibaba Group, Tencent, and Baidu have gotten serious about AI infrastructure, issuing bonds to raise $5 billion this month alone to fund their efforts. In order to catch up in the AI race, those three and JD.com could shell out $32 billion in capital expenditures this year, according to Bloomberg, up from $13 billion in 2023.
While that may be impressive, Nvidia, Alphabet, Amazon, and Meta Platforms plan to spend a combined $400 billion on AI in the coming year. But that raises the inevitable question: Are Chinese AI companies starting to get more bang for their buck? And if so, what does that mean for a stock market that depends on the Magnificent 7?—LB