Chip Happens: Nvidia buys 4% of Intel

Hey Superheroes,

The Fed cut interest rates by 25 basis points to 4.00-4.25% this week, marking its first policy shift this year. While the move was widely anticipated, it’s a sign that the world’s most influential central bank sees growing downside risks to economic growth.

Wall Street cheered with the Nasdaq and S&P 500 hitting fresh record highs. Closer to home though, the ASX 200 couldn’t hold the momentum, finishing the week in the red – its third consecutive weekly loss. Gold was the standout, smashing through US$3,700/oz earlier this week as investors piled into safe havens.

Let’s get into the stories that moved markets this week.

Nvidia spends big to build its future

Nvidia makes its boldest move yet – and it’s not about AI.

The GPU powerhouse announced it will take a US$5 billion stake in Intel, acquiring ~4% of the company. It’s a surprise twist considering the two are longtime rivals. 

But it could mark the start of a deeper strategic alliance – one that could reshape the global semiconductor supply chain.

🔌 Silicon Frenemies?

Intel has struggled to keep up with Taiwan’s TSMC and South Korea’s Samsung in chip manufacturing. Its foundry unit lost nearly US$7 billion in 2023, and its long-term plans – including its next-gen 14A process slated for 2027 – are at risk without new customers or capital.

Nvidia meanwhile has been looking to diversify its manufacturing partners. The tie-up with Intel includes the co-development of multiple chip generations for PCs and data centres, connecting Nvidia’s AI and graphics chips with Intel’s CPUs using Nvidia’s NVLink technology.

Intel will supply processors for these systems and package Nvidia’s chips – helping it secure much-needed production volume.

🧠 Changing of the Chip Guard

Just three years ago, Intel had twice the revenue of Nvidia. Now, Nvidia is expected to surpass Intel’s annual revenue in a single quarter thanks to its dominance in AI accelerators. Its market cap has ballooned to over US$4 trillion while Intel’s had shrunk to ~US$116 billion prior to last night’s announcement.

For Intel, the deal represents a strategic lifeline and possibly the only way it can justify billions in capex to keep its 14A manufacturing roadmap alive. Analysts say the success of this partnership may determine whether Intel’s chip factories can remain competitive.

🔻 AMD Left in the Cold

The partnership could put AMD at a relative disadvantage, which competes with both Nvidia and Intel. Analysts warn the tie-up could squeeze AMD out of major PC and data centre contracts, especially those reliant on x86 architecture, where Intel still dominates.

If Nvidia and Intel successfully integrate their chips into end-to-end systems, it could be a game-changer for the AI PC market – and a major blow to AMD’s growth plans.

Santos Left at the Altar by ADNOC

It was set to be the biggest cash takeover in Aussie history… now it’s just another failed bid on Santos’ resume.

Middle Eastern energy giant ADNOC, via its investment arm XRG, has walked away from a US$36.4 billion deal to acquire Santos, just days before a binding agreement was expected.

❌ Why It Fell Apart

On the surface, the deal looked done. But behind closed doors, things were falling apart.

After 11 weeks of due diligence, XRG cut its valuation of Santos – likely due to a combination of tax liabilities, regulatory risk and portfolio concerns.

Santos wasn’t backing down either. The board demanded stronger shareholder protections, including guarantees on domestic gas supply and help covering a capital gains tax bill in PNG. With both sides refusing to budge, the deal fell through at the final hurdle.

While XRG insists politics wasn’t the issue, many speculate concerns around Australia’s gas market and FIRB approval also played a part.

⚠️ Third Strike for Santos

This is the third failed takeover attempt for Santos in the past decade, following Harbour Energy in 2018 and merger talks with Woodside in 2023. The collapse wiped 12% off Santos’ share price in a single day with investors left wondering what’s next.

🧭 Where to from here?

Investors and analysts are now turning up the heat. Some are calling for asset sales – others, for a strategy overhaul or even leadership change. Santos owns a complex mix of LNG and gas assets across Australia, PNG and Alaska – and shareholders want to see that value unlocked.

Not everyone’s panicking though. Major investors like Wilson Asset Management and Wavestone Capital are still backing CEO Kevin Gallagher, pointing to the Barossa (A$6.1b) and Pikka projects that are expected to boost cash flow from next year.

But with another buyer walking away and questions over how the market values Santos, the pressure is on to deliver – fast.

🔦  Some other things we’re shining the Spotlight on:

ATLASSIAN’S AI SPREE: Atlassian just inked its biggest acquisition yet, buying U.S. startup DX for US$1 billion (A$1.5b). DX helps companies measure developer productivity – making it a natural fit alongside Jira and Confluence. It’s Atlassian’s second AI buy this month, as the Aussie giant doubles down despite a 30% share slide year-to-date.

DISNEY’S LATE NIGHT DRAMA: Disney execs are meeting with Jimmy Kimmel to decide the fate of his talk show after it was suspended by ABC. The earliest it could return is 22 Sept. The controversy adds pressure to late-night TV with CBS already axing Colbert and networks bleeding cash on shrinking audiences.

REX’S RESCUE FLIGHT?: After more than a year in administration, Regional Express (REX) may finally have a buyer. Air T (NASDAQ: AIRT) is close to a deal, pending government sign-off. REX collapsed last year after a failed Virgin tie-up, and any buyer will need deep pockets to replace its ageing fleet.

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