Watchdog, Shareholder… Now Kingmaker
More news on Washington-Nvidia-Intel story from Yesterday
Yesterday I put out a collage of stories on how the U.S. administration is stretching the concept of a capitalist economy by tapping into the profits of semiconductor companies. Which then China responded to (well they didn’t respond to my story, but the move by the administration) by saying that Nvidia is violating China’s anti-monopoly laws.
According to Reuters, “The brief statement by China's State Administration for Market Regulation on Monday did not elaborate on how Nvidia might have violated China's anti-monopoly laws, according to which companies can face fines of between 1% and 10% of their annual sales from the previous year.”
But it could be tied to a backstory about an Israeli company called Mellanox which makes high-speed networking equipment for data centers. Nvidia bought them a few years ago, and now bundles Mellanox equipment with its chips to offer advanced cloud-computing products. Earlier, China had approved Nvidia's deal to buy Israel's Mellanox Technologies with the condition that Nvidia would continue to supply the Chinese market with high-tech GPU chips. But Nvidia was forced to end sales of its most advanced chips to China due to export controls implemented by the administration of former President Joe Biden.
A second issue that keeps getting under the skin of the Chinese government, is Tiktok. These negotiations and decisions are all happening in parallel, and they are all interlinked, at least from the Chinese government point of view.
So, yesterday there was a new twist to the plot; Nvidia investing into Intel, becoming a co-owner of Intel together with the U.S. government. While also continuing to share a slice of its sales to China with the administration.
The headlines sound strange enough on their own: Nvidia and Intel, longtime competitors, suddenly cozying up. Nvidia tossing $5 billion at Intel. The U.S. government quietly taking a 10% stake in Intel. SoftBank swooping in with billions more.
But when you zoom out, it starts to make sense. This isn’t just about two companies. It’s about the U.S. government rewriting the rules of capitalist economy, and Intel becoming the test case.
Washington’s New Playbook
The U.S. has decided that semiconductor supply chains are too important to be left to the market. After years of slipping behind Taiwan’s TSMC, Intel is being rebuilt not just as a company, but as a national project. The White House is now Intel’s biggest backer, investor, and, in some ways, co-CEO.
That’s why Nvidia’s deal matters less for the technology than for the optics. By agreeing to work with Intel - on PC chips, on processors for data centers - Nvidia is giving Washington exactly what it wants: the appearance of a strong domestic player that can carry the load if Taiwan becomes off-limits.
Nvidia’s Calculated Goodwill
For Nvidia, the risks are minimal. The $5 billion investment is pocket change. In return, it buys political goodwill with Washington at a time when the company dominates AI chips and risks being seen as a monopoly.
It also gives customers what they’ve been asking for: x86 CPUs inside their massive Nvidia clusters. And it provides a layer of antitrust cover, a way to show that Nvidia “plays nice” with rivals even as it continues to crush them in the marketplace.
As one analyst put it: “In Nvidia’s world, everyone else is just paying rent.” Throwing Intel a lifeline doesn’t change that, it just makes Nvidia look like a responsible landlord.
Intel’s Survival Story
Intel, meanwhile, is clinging to relevance. Years of failed turnarounds, missed product cycles, and heavy spending left it with a shaky balance sheet and an eroding market share. Now, with government cash, SoftBank’s vote of confidence, and Nvidia’s reluctant partnership, Intel finally has breathing room.
But make no mistake: this isn’t a market-driven comeback. It’s survival by subsidy. Intel’s foundry business, the part that was supposed to make America independent of TSM, isn’t even central to the Nvidia deal. Right now, it’s about keeping Intel’s core products alive long enough to matter.
The Geopolitical Layer
And then there’s China. For years, Intel stayed under the radar, even as Huawei and others were hammered by U.S. sanctions. That was no accident: China still relies heavily on Intel’s x86 chips for countless critical workloads. Replacing that ecosystem would be messy, expensive, and slow.
But with Washington now openly treating Intel as a national champion, the company is stepping onto the geopolitical stage whether it likes it or not. What was once just a chipmaker is now a proxy for industrial policy, national security, and U.S.–China tech rivalry.
The Bigger Picture
So what does all this add up to? Nvidia props up a rival. Intel gets a stay of execution. Washington gets to point to a “revitalized” domestic semiconductor champion.
But underneath the headlines, it’s hard not to see the bigger story: in the name of national security, the U.S. government is moving from watchdog to shareholder, referee to player. And when the state starts running the show, the market starts looking very different.
Resources to this story
Nvidia takes $5 billion stake in Intel, offers chip tech in new lifeline to struggling chipmaker
In latest trade warning to US, China says Nvidia violated anti-monopoly law
Trump and Xi make progress on TikTok deal, plan to meet in South Korea
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I enjoyed how you connected the dots, Petra.
Thanks Rao, nice to hear from you.