Nvidia teams up with Intel, potentially reshaping the AI PC market landscape, putting great pressure on MediaTek.

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According to the agreement disclosed by both parties on Thursday, chip giant NVIDIA announced a $5 billion investment in Intel and reached a partnership to jointly develop next-generation data center and client processors.

According to Chasing Wind Trading Desk, JPMorgan analysts Gokul Hariharan, Jennifer Hsieh, and David Chou analyzed in their latest report that the alliance between NVIDIA and Intel aims to reshape the landscape of the data center and PC markets. This move poses limited short-term direct risks to the leading foundry TSMC, but it is clearly negative for MediaTek's long-term development in the PC market and could inject new momentum into the sluggish AI PC market.

The report points out that the first batch of products is still expected to be manufactured by TSMC, highlighting TSMC's technological leadership in the high-performance computing wafer foundry sector. The combination of Intel's x86 CPUs and NVIDIA's graphics technology may deliver a stronger product lineup for AI workstations.

TSMC's short-term risks are controllable, potential for moderate long-term competition

JPMorgan believes NVIDIA and Intel's partnership will have extremely limited direct impact on TSMC, because the collaboration is focused on product design, not manufacturing.

The report points out that given TSMC’s leading position in high-performance computing (HPC) foundry processes, the first batch of products from this collaboration will likely still be produced by TSMC. This cooperation did not immediately announce adoption of Intel's 18A or 14A process nodes, indicating that Intel's advanced process development has not yet reached the stage of reassuring customers for large-scale collaboration—especially since its 18A process has previously disappointed.

In the long run, NVIDIA may hand over some products to Intel for foundry in the future. But, the report says, for TSMC, facing some competition in advanced process fields may be preferable compared to the continual government scrutiny that comes with absolute dominance.

MediaTek no longer has the exclusive collaboration advantage, cooperation prospects under pressure

Unlike TSMC’s situation, MediaTek faces clear negative impacts in this collaboration.

The report points out that cooperation with NVIDIA in computing and automotive fields is a key strategic cornerstone for MediaTek's diversified expansion into these new markets. However, with Intel’s participation, MediaTek's previously exclusive cooperation with NVIDIA in the PC sector will no longer be unique, making its long-term development prospects “more limited,” especially in the Intel-dominated PC market.

According to the report, the strong product suite combining Intel's x86 CPUs and NVIDIA's GPUs may be more competitive in areas such as AI workstations. In contrast, over the past 12-18 months, the development of the Windows on ARM ecosystem has lagged behind market expectations.

Therefore, JPMorgan says that even though MediaTek’s first jointly developed PC chip with NVIDIA, the GB10, is about to be shipped in large quantities, its future prospects have already become shadowed.

The AI PC market may get a new catalyst

The collaboration between NVIDIA and Intel is expected to provide a “shot in the arm” for the slowly growing AI PC market.

According to JPMorgan, as an emerging category, the AI PC market has been very slow to take off. This is largely because the biggest PC CPU supplier, Intel, had NPUs of insufficient performance in previous products (such as Meteor Lake and Arrow Lake), and its new Lunar Lake processor has also not achieved widespread response from PC makers. Meanwhile, CPU suppliers in the Windows-on-ARM camp, such as Qualcomm, have also failed to achieve strong growth.

The report believes that if Intel can leverage NVIDIA's graphics and AI technology to introduce more competitive products more quickly, it may ultimately spark a stronger AI PC product cycle.

Differentiated impact on the supply chain: product side better than manufacturing side

This collaboration’s impact on the Asian semiconductor supply chain is differentiated, with companies related to Intel’s products seeing more obvious benefits.

The report expects the partnership will benefit companies on the supply chain for Intel products; on the other hand, since no new foundry business is involved in the cooperation, semiconductor equipment suppliers related to Intel's foundry business may only see limited upside.

The report also adds that whether the market’s expectations for Intel’s increased spending can be realized still depends on its 14A process gaining more customer confidence.

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