The deal, announced on Thursday, will involve a partnership between the two American companies to make personal computer and data centre chips, as demand for AI continues to surge and companies seek to power massive data centres.

It will make Nvidia one of of Intel’s biggest shareholders, with a roughly 4% stake in the troubled semiconductor company.

Intel’s stock surged more than 25% on news of the deal, which could boost the once-dominant chipmaker. Shares in Nvidia rose roughly 3%.

Intel has struggled in recent years to build out more chip capacity. It has fallen far behind rival Nvidia, which has dominated the AI boom by offering chips that are crucial for developing the technology.

Nvidia’s market cap has soared past $4 trillion while Intel’s has languished at around $100bn.

The new collaboration represents “a fusion of two world-class platforms”, Jensen Huang, Nvidia’s CEO, said in a statement.

“Together, we will expand our ecosystems and lay the foundation for the next era of computing,” Mr Huang added.

Nvidia is motivated to invest in Intel in order to diversify some production away from other competitors – notably, Taiwan’s TSMC, said Gil Luria, head of technology research at D.A. Davidson. The chip giant is “now in the mode of investing in other companies in the AI ecosystem in order to keep the momentum for the emerging technology,” Mr Luria said.

Nvidia is also seeking to “support the US administration as it tried to prop up the only American company able to produce chips in the US,” he added.

In late August, the Trump administration announced that the federal government would take a 10% stake in Intel.

At the time, Commerce Secretary Howard Lutnick called the White House investment a “historic” agreement that “strengthens US leadership in semiconductors, which will both grow our economy and help secure America’s technological edge”.

The Trump administration’s announcement came after Intel became a target of US President Donald Trump. The president had accused Intel CEO Lip-Bu Tan of having problematic ties with China and called on him to resign, though Mr Tan called the accusations “misinformation”.

In response to the latest investment from Nvidia, Mr Tan said: “We appreciate the confidence Jensen and the Nvidia team have placed in us.”

Intel’s semiconductors were once a crucial part of the popularity of personal computers. But the company has failed to maintain its dominance in Silicon Valley over the past two decades. It has most recently taken a hit from its struggles to profit from the AI surge, in contrast to Nvidia’s success.

The American chipmakers’ partnership comes against a backdrop of challenges in the Chinese market. Nvidia is struggling with its sales to China, as the country seeks to ramp up its domestic chip production.

Nvidia has also found itself in the crosshairs of the US-China trade war – geopolitical tensions that are weighing on its sales. Mr Huang this week said he was “disappointed” that China has reportedly ordered its top technology companies to halt purchases of the firm’s AI chips.

Ray Wang, a semiconductor analyst at Futurum Group, noted that Nvidia’s new stake in Intel does not appear to include an investment in Intel’s contract manufacturing business – a part of the company that makes chips for other firms. Intel might not get a much-needed boost to that segment of its business.

Mr Wang added that other competitors in the chip sector – notably, AMD and TSMC – stand to suffer from the deal.

Sales of the firm’s chips hit more than $39bn (£30.7bn) over the three months ended 27 January, up 74% year-on-year.

Nvidia has seen a surge of demand, as big tech companies turn to the firm for chips that can handle the large amounts of data used to train AI models.

But DeepSeek said it had trained its chatbot using less advanced, and less expensive chips.

Its launch prompted a sharp sell-off in Nvidia shares earlier this month, a hit felt throughout the market.

Investors calmed after big companies such as Facebook owner Meta said they expected to continue their current AI investment strategies.

Nvidia boss Jensen Huang said he was not worried that demand would suddenly shift, saying that software in the future would be created by machine learning that needs chips with different architecture than the “hand-coding” of the past.

“We know fundamentally software has changed,” he said, adding that it was also still “early days” for the use of AI to spread.

Nvidia currently dominates the market in advanced chips, making it central to the boom in AI investment at companies such as Microsoft.

Its shares have surged more than 400% over the last two years, giving the company a market value of more than $3tn.

Nvidia said it was focused on rapidly building out production of its latest chips, known as Blackwell, which helped to drive a surge in the firm’s revenue.

The company’s finance chief Collette Kress said its AI data centre business was strongest in the US, but the firm was also seeing demand grow in other parts of the world, pointing to investments by France and the European Union.

She said demand in China – where US trade controls have blocked the firm from exporting certain chips – remained lower and that the firm expected shipments to remain roughly at the current level.

The convention is expected to draw more than 150,000 attendees and over 4,500 exhibitors over the next week.Nvidia’s shares touched a new record high on Monday in the run-up to Mr Huang’s highly anticipated address.He spent the first part of his speech talking about the company’s history.Founded in 1993, Nvidia was originally known for making the type of computer chips that process graphics, particularly for computer games.Thirty-one years later, Nvidia now stands at the forefront of the development of chips that power AI, with a market value of more than $3tn.However, Nvidia still faces some significant challenges, including from regulators around the world who have raised concerns about its growing dominance of the AI chip market.Last year, the company said it had been contacted by watchdogs in the US, UK, European Union, South Korea, and China.

The probe marks the latest salvo in an ongoing US-China tech war over the lucrative semiconductor market.

Last week, Washington tightened restrictions on sales of certain exports to Chinese companies and the clash over the industry is expected to continue when Donald Trump re-enters the White House.

Nvidia said it was “happy to answer any questions regulators may have about our business”.

“We work hard to provide the best products we can in every region and honour our commitments everywhere we do business,” the company said in a statement.

On Monday, Chinese state broadcaster CCTV said that authorities in Beijing had launched a probe “in accordance with the law”.

It said Nvidia had been accused of violating commitments made in 2020 when it acquired Mellanox Technologies, a smaller firm.

It comes after a fresh crackdown by the US last week, which saw restrictions on sales to 140 companies including Chinese chip firms such as Piotech and SiCarrier without special permission.

At the time, China responded with new tough rules restricting sales of key minerals to the US, including antimony, gallium, and germanium.

Analysts noted that the move was significant for singling out the US for such restrictions, instead of instituting blanket limits.

Several trade groups representing Chinese firms also spoke out, warning their members against buying from US companies.

Founded in 1993, Nvidia was originally known for making the type of computer chips that process graphics, particularly for computer games.

The tech giant now stands at the forefront of the development of chips that power artificial intelligence (AI), with a market value of more than $3tn.

Its growing dominance of the industry has caught the attention of competition regulators in the US and elsewhere.

Last month, Nvidia acknowledged it had been contacted by watchdogs around the world, including in the US, the UK, the European Union, South Korea and China.

But the company has also been caught in the middle of rising geopolitical and economic tensions between the US and China, as the two countries race to establish dominance over high-end chips.

Nvidia reported last month that customers based in “China, including Hong Kong” had accounted for about 13% of sales so far this year.

That is down since the US started ramping up restrictions of advanced technology to Chinese firms just a few years ago, citing national security fears.

Nvidia’s chief executive Jensen Huang was tight-lipped earlier this year when asked by business analysts about the political risks for the firm in the months ahead.

“We guide one quarter at a time,” he said. “Whatever the new administration decides, we’ll, of course, support the administration.”

James Lewis, researcher at the Center for Strategic and International Studies, a Washington-based think tank, said the move against Nvidia appeared to be another form of “retaliation” by Beijing.

“The timing is not a coincidence,” he said. “It’s mainly a message to the US government – the Chinese have decided they’re not just going to take sanction after sanction.”

In prior cases when the US has imposed export controls, it has only delayed not stopped the other country’s ability to gain access to the technology, Mr Lewis said, adding that he was skeptical that the AI at the heart of the dispute was as game-changing as the two sides contend.

Regardless of the reasoning, however, he said he expected the tit-for-tat to continue.

“It’s really a grudge match on both sides,” he said.