Semiconductor giant Nvidia has relied on ARM Holdings for CPU cores in its superchips for quite some time.
The company even tried to acquire chip designer ARM (ARM) , but the FTC blocked the acquisition. Nvidia (NVDA) , currently the world’s most valuable company, has more new chips planned based on ARM designs, including a laptop chip named N1, which is based on the GB10 superchip.
Considering that, the latest Nvidia move is very surprising. CEO Jensen Huang is always thinking at least a couple of moves ahead, and we can’t see the whole picture yet.
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Nvidia Q2 net income grows 59% to $26.4 billion year over year
On Aug. 27, Nvidia reported its results for Q2 of fiscal 2026.
Nvidia founder and CEO Jensen Huang stated: “Nvidia NVLink rack-scale computing is revolutionary, arriving just in time as reasoning AI models drive orders-of-magnitude increases in training and inference performance. The AI race is on, and Blackwell is the platform at its center.”
Nvidia Q2 earnings highlights:
- Revenue growth of 56% to $46.7 billion YoY
- Gross margin of 72.4%, compared to 75.1% in Q2 FY 2025
- Net income of $26.4 billion, an increase of 59% YoY
Nvidia’s outlook for Q3 of fiscal year 2026:
- Revenue is expected to be $54.0 billion, plus or minus 2%.
- Gross margin is expected to be 73.3%, plus or minus 0.5%.
- The company has not assumed any H20 shipments to China in the outlook.
Nvidia invests $5 billion into Intel
On Sept. 18, Nvidia and Intel (INTC) , one of the legendary Silicon Valley players, revealed plans to develop multiple generations of custom data center and PC products together. Nvidia said it would invest $5 billion in Intel’s common stock.
Nvidia will buy and integrate custom Intel x86 server CPUs into its scaled-up rack architecture using NVLink, which was previously possible only for Nvidia’s custom Arm CPUs.
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Intel will build x86 system-on-chips that integrate Nvidia RTX GPU chiplets for the PC market.
Intel CEO Lip-Bu Tan offered additional details: “Intel’s leading data center and client computing platforms, combined with our process technology, manufacturing, and advanced packaging capabilities, will complement Nvidia’s AI and accelerated computing leadership to enable new breakthroughs for the industry.”
The announcement was great news for Intel, whose shares jumped 22.8% for the week, ending at $29.58 are now up 47.5% and are up 47.5% year-to-date.
Analysts expect Nvidia to get improved access to enterprise AI deployments
Following the Nvidia deal with Intel, Bank of America analyst Vivek Arya and his team updated their opinion on Nvidia shares.
The team noted that the timeline for each of the announced products remains unknown and could take one or more years to develop.
This indicates limited near-term impact for peers Advance Micro Devices (AMD) and ARM and potential upside for semiconductor capital equipment and electronic design automation companies.
AMD shares fell 0.34% to $157.39 on Friday but is up 27.6% in 2025. ARM shares fell 2.5% to $142.91. Its year-to-date gain is 30.3%.
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They also noted that the announcement didn’t mention Nvidia’s use of Intel Foundry.
Analysts said this deal will allow Nvidia to scale up capabilities with NVLink (up to 72 GPU/rack) in the x86 ecosystem, expanding the reach of the proprietary NVLink protocol.
They also expect that the deal will provide Nvidia with improved access to enterprise AI deployments through Intel, while keeping foundry optionality and growing U.S. investment.
Analysts noted downside risk factors for Nvidia:
- Weakness in the consumer-driven gaming market
- Competition with major public firms
- Larger-than-expected impact from restrictions on compute shipments to China
- Lumpy and unpredictable sales in new enterprise, data center, and automotive markets
- Potential for decelerating capital returns
- Enhanced government scrutiny of Nvidia’s dominant market position in AI chips
Arya reiterated a buy rating and a target price of $235, based on 37 multiple his estimate for the price-to-earnings ratio, excluding cash for calendar year 2026. This multiple is in the middle of Nvidia’s historical forward-year P/E ratio range of 25 to 56.
He concluded that the multiple is “justified by [Nvidia]’s leading share in fast-growing AI compute/networking markets, offset by lumpiness in global AI projects, cyclical gaming market, and concerns around access to power.”
Nvidia shares, up slightly to $166.60 on Friday, slipped 0.7% on the week but are up 31.5% for the year.
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