NVIDIA partners with Intel, potentially reshaping the AI PC market landscape, MediaTek under significant pressure

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

According to news from the Wind Trading Desk, JP Morgan analysts Gokul Hariharan, Jennifer Hsieh, and David Chou analyzed in their latest research 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 TSMC, the leading chip foundry, but constitutes a clear negative for MediaTek's long-term development in the PC market and may inject new momentum into the sluggish AI PC market.

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

TSMC's Short-Term Risks Are Manageable, Long-Term May Face Mild Competition

JP Morgan believes that the collaboration between NVIDIA and Intel has extremely limited direct impact on TSMC, as the core of the collaboration is product design, not manufacturing.

The report noted that based on TSMC's leading position in high-performance computing (HPC) foundry processes, the first batch of products from the collaboration is likely to still be produced by TSMC. This collaboration has not immediately announced the adoption of Intel's 18A or 14A process nodes, indicating that Intel's advanced process development has not yet reached a stage where customers can confidently engage in large-scale collaboration, especially since the results of its 18A process have previously been disappointing.

In the long run, NVIDIA may eventually outsource some products to Intel. However, the report states that for TSMC, facing some competition in advanced process technology, compared to ongoing government scrutiny due to absolute dominance, may be a more ideal situation.

MediaTek's Exclusive Cooperation Advantage Is No Longer, Cooperation Prospects Under Pressure

Unlike TSMC's situation, MediaTek faces clear negative impacts from this collaboration.

The report pointed out that the collaboration with NVIDIA in the computing and automotive sectors is a key strategic pivot for MediaTek's diversification into these new markets. However, with Intel's involvement, MediaTek's cooperation with NVIDIA in the PC sector will no longer be exclusive, and its long-term development potential has thus become "more limited," especially in the Intel-dominated PC market.

The report analyzes that the powerful product combination of Intel's x86 CPU and NVIDIA's GPU 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 based on the Arm architecture has lagged behind market expectations.

Therefore, JP Morgan states that although MediaTek's first PC chip GB10, developed in collaboration with NVIDIA, is about to be shipped in large quantities, its future prospects have been overshadowed.

The AI PC Market May Welcome New Catalysts

The partnership between NVIDIA and Intel is expected to inject a "shot in the arm" into the sluggish AI PC market According to JP Morgan's view, AI PCs, as an emerging category, have been slow to take off in the market. This is largely due to the insufficient NPU performance in previous products (such as Meteor Lake and Arrow Lake processors) from the largest PC CPU supplier, Intel, and its new Lunar Lake processor has not received widespread response from PC manufacturers. 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 launch more competitive products at a faster pace, it may ultimately give rise to a stronger AI PC product cycle.

Differentiated Impact on Supply Chain, with Product Side Outperforming Manufacturing Side

The impact of this collaboration on the Asian semiconductor supply chain shows a differentiated trend, with manufacturers related to Intel's products benefiting more significantly.

The report anticipates that this collaboration will be favorable for companies in Intel's product supply chain; conversely, since the collaboration does not involve new wafer foundry business, semiconductor equipment suppliers related to Intel's foundry business may only see slight upward potential.

The report also adds that the market's expectations regarding whether Intel can expand its spending remain to be seen, pending more customer confidence in its 14A process