Intel Falls 2% After Nvidia Halts 18A Manufacturing Tests
Nvidia stopped testing Intel's most advanced chip-making process, casting doubt on Intel's foundry turnaround as it seeks major customers beyond Microsoft and Amazon.
Intel's foundry ambitions took a hit on Christmas Eve.
Shares dropped about 2% after Reuters reported that Nvidia tested Intel's 18A chip manufacturing process but stopped moving forward. Two sources familiar with the matter told Reuters that Nvidia had evaluated the technology but decided against proceeding.
Intel countered that its 18A manufacturing technologies are "progressing well."
What 18A Means for Intel
The 18A process is Intel's most advanced manufacturing technology, featuring gate-all-around transistors for the first time. The technique allows finer control over transistor behavior, enabling chips with more processing power at lower energy consumption.
Intel recently opened Fab 52 at its Ocotillo site in Arizona—the first facility to mass-produce chips using 18A. The company has positioned this technology as critical to competing with Taiwan Semiconductor Manufacturing Company in the foundry business.
Attracting major customers like Nvidia would validate that bet. Losing them raises questions.
The Partnership That Was
Just months ago, things looked different. In September, Intel and Nvidia announced a collaboration where Intel would develop custom x86 CPUs for Nvidia's AI infrastructure platforms while also creating system-on-chips integrating Nvidia RTX GPU chiplets.
As part of that deal, Nvidia committed to investing $5 billion in Intel's common stock at $23.28 per share, pending regulatory approvals.
The 18A testing was part of evaluating the manufacturing relationship. The decision not to proceed doesn't necessarily kill the broader partnership, but it signals that Intel's foundry services didn't meet Nvidia's bar.
Intel's Other Customers
Intel has announced 18A deals with Microsoft and Amazon for custom chips. Reports suggest Apple might use Intel's foundry for entry-level M-series chips starting in 2027.
But volumes from these clients are relatively small compared to what a major Nvidia contract would bring. And competition for AI chip manufacturing is intense—TSMC remains the dominant player, with Samsung fighting for second place.
Broadcom also reportedly tested Intel's 18A process. Whether they're still evaluating or have reached similar conclusions as Nvidia isn't clear.
Why It Matters
Intel's stock has struggled as the company burns cash on its foundry buildout while losing market share in its core CPU business to AMD. The turnaround hinges on 18A attracting enough customers to justify billions in capital expenditure.
Nvidia walking away—even from just the manufacturing side—adds uncertainty. The AI chip leader has access to TSMC's most advanced nodes and may not need Intel's capacity.
For Intel bulls, the counterargument is that one testing halt doesn't define the technology's viability. Microsoft, Amazon, and potentially Apple represent real demand. And Intel's integrated design-and-manufacturing model could offer advantages that pure-play foundries can't match.
The Stock's Position
Intel shares closed at around $19 on Christmas Eve, down about 2% on the day. The stock is off roughly 60% from its 2024 highs as investors grapple with the execution risks ahead.
The 18A technology works—Intel has demonstrated that. The question is whether enough customers will choose it over TSMC. On that front, Nvidia's decision to step back doesn't help.