Is Intel Stock a Buy Now That It's Backed by Nvidia?

Key Points

• Nvidia is investing $5 billion in Intel and partnering on custom data center and PC chips.

• Intel's latest quarter showed flat revenue, margin pressure, and cautious guidance as the turnaround continues.

• If the deal accelerates product traction and cost discipline, today's valuation may be reasonable -- though risks remain.

• 10 stocks we like better than Intel ›

Intel (NASDAQ: INTC) has a new and powerful ally. On Thursday, Nvidia (NASDAQ: NVDA) said it will invest $5 billion in Intel and codevelop multiple generations of custom products, spanning data centers and PCs. Intel shares jumped more than 20% on the news, as investors digested what a tie-up with the leader in artificial intelligence (AI) computing could mean for the company's multiyear turnaround.

The semiconductor veteran designs and manufactures CPUs and runs a contract manufacturing business. In recent years, Intel has wrestled with product delays, shrinking margins, and heavy losses in its foundry segment. The Nvidia partnership gives Intel access to new design opportunities and a stronger place in AI-centric systems. Whether that translates into durable earnings power is the question investors care about.

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A vote of confidence that counts

Nvidia's announcement laid out two concrete planks. First, Intel will design Nvidia-custom x86 CPUs that Nvidia will integrate into its AI infrastructure platforms. Second, Intel will build x86 system-on-chips for PCs that integrate Nvidia RTX GPU chiplets.

As part of the collaboration, Nvidia will invest $5 billion in Intel common stock at $23.28 per share, subject to regulatory approvals.

"This historic collaboration," Nvidia CEO Jensen Huang said, ties Nvidia's AI stack to Intel's vast x86 ecosystem. Intel CEO Lip-Bu Tan framed it as confidence in Intel's roadmap and manufacturing -- and a path to "new breakthroughs for the industry."

The market reaction was swift. Intel rose more than 20% intraday, while Nvidia ticked higher as well. The move arrives as Intel trims costs, resets capital spending, and narrows its focus. Notably, the companies did not commit to shifting Nvidia's GPU manufacturing to Intel's fabs; investors should view this as a design and platform collaboration plus equity capital -- not a wholesale manufacturing shift.

Recent results show a company still in repair

Intel's business results have been underwhelming. Its second-quarter revenue was $12.9 billion, roughly flat year over year. Generally accepted accounting principles (GAAP) gross margin declined to 27.5%, and GAAP earnings per share was a loss of $0.67, pressured by $1.9 billion of restructuring charges and other one-time items. Non-GAAP earnings per share were a loss of $0.10.

For the third quarter, Intel guided revenue to $12.6 billion to $13.6 billion and non-GAAP earnings per share of about $0.00 at the midpoint.

There were signs of operational progress and AI relevance. Data center and AI revenue rose 4% year over year to $3.9 billion, and Intel highlighted that its Xeon 6776P is the host CPU in Nvidia's latest DGX B300 systems.

Still, the overall picture remains mixed, with margins depressed and the foundry business a drag as Intel pares projects and slows certain builds to defend returns.

"We are laser-focused on strengthening our core product portfolio and our AI roadmap," Tan said in the quarterly release -- a reminder that the turnaround is still very much underway.

What's next?

Viewed through an investor lens, two things matter: earnings power and price. With trailing-12-month revenue around low-$50 billion and losses on the bottom line, price-to-earnings is not useful; price-to-sales in the mid-2s is a better quick gauge for now. That leaves the stock leaning on a credible path back to healthier gross margins and operating income.

The Nvidia deal may help by anchoring Intel CPUs inside Nvidia's AI platforms, creating a new PC silicon vector with integrated RTX chiplets, and signaling third-party confidence that can attract talent and customers. But execution -- on both products and cost discipline -- still has to show up in the numbers.

Of course, Nvidia's involvement doesn't guarantee success. Foundry losses and prior write-downs underscore how costly it is to rebuild manufacturing relevance.

Additionally, investors shouldn't forget Intel's challenges. Its guidance implies only modest sequential improvement, and Intel must prove it can expand gross margin back toward a level that supports sustainable free cash flow.

Finally, competition is intense, with Advanced Micro Devices growing in servers and client CPUs even before layering in its own AI accelerators. And while the partnership is meaningful, it does not remove the need for Intel to hit product and manufacturing milestones over the next several quarters.

But Nvidia's stake and the co-development roadmap arguably do increase the odds that Intel's turnaround gains traction. The collaboration creates real product hooks and stronger incentives for both sides to make the designs successful. If Intel converts these tailwinds into margin recovery and stable growth over time, today's valuation could look reasonable for investors with patience.

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool recommends the following options: short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.