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Nvidia, the world’s most valuable chipmaker, announced on Thursday that it will invest $5 billion in Intel and partner with the struggling semiconductor giant. The two companies will jointly work on custom data centers powering artificial intelligence infrastructure as well as next-generation PC products, Nvidia said in a statement.

Calling it a historic step, Nvidia CEO Jensen Huang declared: “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.”

The deal arrives at a critical time for Intel, once the undisputed leader of the PC era. After missing the shift to mobile devices in the late 2000s, Intel fell further behind during the AI wave that propelled Nvidia to the top, foreign media reported.

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Intel reported nearly $19 billion in losses last year and another $3.7 billion loss in the first half of this year. The company has already announced plans to cut 25 per cent of its workforce by the end of 2025.

Also Read: From $23 billion to $3 trillion: Alphabet joins Apple, Microsoft and Nvidia in elite club 

The US government recently stepped in with a 10 per cent equity stake in Intel, aiming to shore up domestic manufacturing and secure American leadership in critical technologies.

Under the agreement, Intel will design custom chips for Nvidia’s AI data center platforms, while in the PC market, Intel will build processors that integrate Nvidia’s technologies. The companies said their goal is to “seamlessly connect” their architectures, combining Intel’s CPUs with Nvidia’s GPUs.

Wedbush Securities analyst Daniel Ives called the deal transformational: “This is a game-changer deal for Intel as it now brings them front and center into the AI game. Along with the recent US government investment for 10 per cent (equity stake in Intel) this has been a golden few weeks for Intel after years of pain and frustration for investors.”

Also Read: 'I am afraid to say..': Why Nvidia CEO Jensen Huang sees AI paving way for four-day work weeks

The collaboration also comes amid growing competition from China, which is working to reduce its dependence on US  semiconductor technology. As per foreign media reports this week said Chinese officials have barred major tech companies from buying Nvidia chips, while Huawei is expanding its own AI chip manufacturing capabilities.

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