MediaTek shares jump 10% after Nvidia's $3.5 billion AI chip deal
MediaTek shares surged 10% after Nvidia's $3.5 billion investment and partnership, boosting its data center ambitions in the AI chip market.
The companies announced the deal on Monday, with Nvidia investing $3.5 billion in convertible bonds issued by MediaTek. This has added fuel to a near 200% rally in MediaTek's shares this year.
MediaTek is the world's biggest smartphone chip company by market share, according to Counterpoint Research, and the main rival to U.S. giant Qualcomm. However, MediaTek has recently sought to diversify by designing custom chips for data centers.
Hyperscalers and other tech companies are increasingly building custom chips to run AI workloads. MediaTek is emerging as a player that can build these, posing a potential challenge to Broadcom, a market leader.
The partnership will see MediaTek offer Nvidia's NVLink Fusion platform for customers developing custom AI chips. That means the custom semiconductors that MediaTek builds can be integrated with Nvidia's AI infrastructure and systems.
NVLink Fusion is part of Nvidia's strategy to stay central to AI infrastructure even as companies move toward using their own chips for some AI processes.
The two companies will also work together on "local AI computing," which means chips for PCs and systems for cars.
In June, MediaTek said its custom AI chip business would bring in $2 billion revenue this year with a total addressable market of up to $80 billion by 2027. CNBC has reached out to MediaTek to ask if the Nvidia deal has changed that guidance.
In a press release issued Monday, Nvidia CEO Jensen Huang called MediaTek "one of the world's great semiconductor companies."