Nvidia is buying a $5 billion stake in Intel

Nvidia $NVDA plans to take a $5 billion stake in chipmaker Intel $INTC as the two tech companies have agreed to co-develop data center and PC chips. The news comes on the heels of the U.S. government acquiring a 9.9% stake in Intel via an $8.9 billion investment in the company last month.

Intel stock soared 25% shortly after markets Thursday. Nvidia stock rose about 2%%.

“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. Together, we will expand our ecosystems and lay the foundation for the next era of computing,” Nvidia CEO Jensen Huang said in a statement.

Nvidia will buy Intel shares at a price of $23.28, slightly less than the company's closing price on Wednesday, but more than the $20.47 per share the government paid. The deal will require regulatory approvals and will make Nvidia a 4% owner of Intel.

The CEOs of the two companies will hold a news conference Thursday at 1 p.m. E.T. to discuss the deal.

While the companies will work together to develop the new chips, Nvidia has not yet committed to a manufacturing deal with Intel for them. Instead, it will design custom processors for data centers, which Nvidia will sell alongside its AI GPUs. Nvidia will ensure its chips and the Intel chips communicate at higher speeds, which will encourage adoption.

At least one analyst said that while this is certainly a win for Intel, it could be a bigger victory for Nvidia in the long run.

"What this move really signals is Nvidia locking down the rules of the new digital economy," Futurum Group wrote in a note to investors. "For the last decade, CPUs were the tax you paid to plug GPUs into racks. Now Nvidia is flipping that: the CPU becomes an extension of the GPU fabric. By taking a 5% stake in Intel and co-developing a NVLink-capable Xeon, Nvidia is ensuring that the world’s most entrenched compute base -- x86 -- becomes natively interoperable with its accelerators."

For the PC market, Intel will build and offer chips that integrate Nvidia's RTX GPU, which should be popular with gamers and individuals who still attempt to mine Bitcoin from home.

“Intel’s leading data center and client computing platforms, combined with our process technology, manufacturing and advanced packaging capabilities, will complement NVIDIA’s AI and accelerated computing leadership to enable new breakthroughs for the industry," said Lip-Bu Tan, CEO of Intel.

It has been quite a ride recently for Tan. Last month, Donald Trump demanded his resignation, accusing him of having ties to China and saying Tan "must resign, immediately. There is no other solution to this problem."

Two weeks later, the government announced an investment in Intel and halted all criticism of Tan. The stock has increased 28% since Trump's comments, not counting Thursday's pre-market gains. With those, the jump is 65%.