INTC stock price surges 30%: Could an Nvidia and Intel team-up be the best chance to beat China in AI?

Nvidia took a cue from the U.S. government on Thursday, acquiring a $5 billion stake in Intel Corp. (Nasdaq: INTC). Last month, President Trump announced that the U.S. government was also making a $9 billion investment in Intel, meaning that Nvidia and the United States are now among Intel’s largest shareholders.

All told, it’s a major Silicon Valley shake-up that could have wide-ranging effects, especially as the artificial intelligence race continues to heat up. In fact, the AI arms race is at the center of the new partnership, as the two will jointly develop chips for both personal computers and data centers.

“This historic collaboration tightly couples Nvidia’s AI and accelerated computing stack with Intel’s CPUs and the vast x86 ecosystem—a fusion of two world-class platforms,” said Nvidia founder and CEO Jensen Huang in a statement. “Together, we will expand our ecosystems and lay the foundation for the next era of computing.”

There’s no denying that the news is big, and investors treated it as such. Intel’s stock soared more than 30% on Thursday, and Nvidia’s jumped more than 3.5%.

The intel on Intel-Nvidia

But there’s potentially more at stake than merely share price increases. Nvidia’s investment may signal—or be—the biggest, boldest move yet as American tech firms beef up to battle those in China.

It also poses big challenges for competitors such as Advanced Micro Devices (AMD) and represents a new dynamic in the semiconductor industry at large. For instance, Taiwan Semiconductor, perhaps the most dominant company in the space, now has a new adversary to deal with—and its stock fell nearly 7% when the trading day opened (though it did bounce back).

All told, the investment helps make Intel more competitive and gives Nvidia more avenues for distribution for its chips. That’s important, coming off the news that China‘s internet regulator, the Cyberspace Administration of China, is reportedly telling Chinese tech companies that they cannot buy or use chips from Nvidia, according to the Financial Times.

Looking ahead, it’s unclear whether the combined efforts of Nvidia and Intel will be enough to go blow-for-blow with companies like Huawei, particularly as global trade wars continue. Analysts, too, think that the partnership sends a bigger message to the market: Old dynamics are going out the window.

“This is truly like the Yankees and the Red Sox coming together to end their rivalry—the companies did not like each other whatsoever,” David Wagner, head of equity and portfolio manager at Aptus Capital Advisors, said per reporting by Reuters. “It’s a massive step in the right direction for U.S. chip designers, and breathes new life into a poorly run company for decades.”