Intel Corporation (INTC) Earnings Call Transcript & Summary

Good morning, everyone. I'm Mylene Mangalindan, Vice President of Corporate Communications at NVIDIA. Thank you for joining us to discuss the press release we issued today regarding a collaboration between NVIDIA and Intel to jointly develop AI infrastructure and personal computing products. With me on the call today are Jensen Huang, Founder and Chief Executive Officer of NVIDIA; and Lip-Bu Tan, Chief Executive Officer of Intel Corporation. [Operator Instructions] As a reminder, this call is being recorded. The content of today's call is NVIDIA's property. It can't be reproduced or transcribed without prior written consent. During this call, NVIDIA and Intel may make forward-looking statements based on current expectations. These are subject to a number of significant risks and uncertainties. For a discussion of factors that could affect their businesses, please refer to the disclosure in NVIDIA's and Intel's most recent Forms 10-K and 10-Q and the reports that they may file on Form 8-K with the Securities and Exchange Commission. With that, let me turn the call over to Jensen.

Good morning, everyone. AI is driving a reinvention of every layer of the computing stack. 60 years ago, IBM introduced the System/360, the first general-purpose computer. It launched the modern computing era powered by Moore's Law and CPUs, programmed line by line by human hands, but general purpose computing has reached its limits. To keep advancing, we invented a new way forward. NVIDIA pioneered GPU-accelerated computing, increasing performance by orders of magnitude, tens, hundreds, thousands of times faster while dramatically improving energy and cost efficiency. That innovation opened new frontiers in science and industry, and it sparked the Big Bang of artificial intelligence. Today, we're taking the next great step. Just moments ago, NVIDIA and Intel announced a historic partnership to jointly develop multiple generations of x86 CPUs for data centers and PC products. This collaboration will tightly couple and optimize Intel's x86 CPUs for NVIDIA's AI and accelerated computing architecture. Together, our companies will build custom Intel x86 CPUs for NVIDIA's AI infrastructure platforms, our data center platforms, bringing x86 into NVIDIA's NVLink ecosystem. And for personal computing, we're going to create new Intel x86 SoCs that integrate NVIDIA GPU chiplets, fusing the world's best CPU and GPU to redefine the PC experience. This partnership is a recognition that computing has fundamentally changed. The era of accelerated and AI computing has arrived. Today is a very exciting day and a very big day. Intel and NVIDIA are partnering to drive it forward. I'm delighted to partner with Lip-Bu Tan, long-time friend and many of my colleagues at Intel in this great partnership, this historic partnership. And now let me turn it over to Lip-Bu to tell you about the exciting partnership we're entering into.

Yes. Thank you, Jensen, and thank you, all of you for joining. Jensen and I know each other for more than 10 -- 30 years. And I still remember that Jensen had the vision of building the system platform, software and with the CUDA and the long-term vision that you have for the company. And I have to salute him. He's done a fabulous job building that AI platform, driving the whole new market opportunity. I'm so excited to be able to work together with Jensen to build a new era. And this is historical collaboration between the 2 companies. And I think this is a very big important milestone. I call it a game-changing opportunity that we can work together. And I would say that we are proud that NVIDIA is an investor to Intel, and thank you for supporting and confident in us and trust in us. And I think this milestone, the critical role that Intel can play in the ecosystem, and I'm grateful for the confidence that you place with us. In terms of product perspective, and I just make 3 points just to add on to building on the Jensen comments. Number one, this collaboration is built on the core strengths of both companies. NVIDIA is a clear leader in AI accelerated computing. Intel is a leader in the data center and client PC CPU. This collaboration brings all together for the best for the industry going forward. Number two, this collaboration has unleashed the new era of x86 innovation and x86 is a foundational role to play in the next era of computing. And I'm excited about what can be created together in the NVLink stack scale solution that based on x86. And x86 client SoC with NVLink interconnect and united memory and also the advanced packaging that can bring all together and then to make it together for making the company and for the industry. And number three, all of this is great for our customer. Our motto is very simple, make great products and delight the customer. That is what this collaboration is all about, and our team are ready and excited to work together, both teams to make it a success together. And now I'll open up for some questions.

This concludes our prepared remarks. Operator, please open the call for questions. Thank you.

[Operator Instructions] Your first question comes from Jim Cramer of CNBC.

First, congratulations, gentlemen. Can you help us understand what the market landscape looks like with this product partnership? And how does it expand the opportunity and growth for both companies?

Yes. Thanks a lot, Jim. Lip-Bu, I'll take the first shot at it, and you could help me out. So if you look at the AI computing world, let me take it in 2 segments, the AI computing world first. These are supercomputers. And as you know, Jim, we recently introduced the scale-up NVLink 72 rack scale computers. That involves designing a custom CPU we call Vera that's tightly integrated with the GPUs, Blackwell GPUs so that we can disaggregate NVLink switches, scale it up into a rack scale system, essentially have an entire rack behaving as if it's one giant computer, one giant GPU. Well, in order to do that, we have to really customize the CPU to do that. And so this architecture, the NVLink 72 rack scale architecture is only available for the Vera CPU that we build, the ARM CPU that we build. And for the x86 ecosystem, it's really unavailable except with server CPUs over PCI Express. And that has limitations in how far you could scale these scale-up systems. And so the first opportunity is that we can now with Intel x86 CPU, integrate it directly into NVLink ecosystem and create these rack-scale AI supercomputers. The second thing is there's 150 million laptops sold per year. And NVIDIA's market largely targets squarely at gaming and workstation markets where the discrete GPUs are used. And we're very successful there, and we continue to grow there, and we're going to continue to grow there. There's an entire segment of the market where the CPU and the GPU are integrated, and it's integrated for form factor reasons, maybe it's for cost reasons, maybe it's for battery life reasons, all kinds of different reasons. And that segment has been largely unaddressed by NVIDIA today. And so what the Intel team and I are doing, NVIDIA is doing is that we're creating an SoC that fuses 2 processors. It fuses the CPU and NVIDIA's GPU, RTX GPU using NVLink. And it fuses these 2 dies into essentially virtual giant SoC, and that would become essentially a new class of integrated graphics laptops that the world has never seen before. That entire -- that segment of the market is really quite rich, and it's really quite large, and it's underserved today with state-of-the-art world-class GPUs like NVIDIA is able to build.

I think Jensen, if I can just add on to it. And I think clearly, it's all about the scale and in terms of the best of GPU accelerator and then the best of 86 and then with NVLink linked together and then able to scale. And some of the markets that we both are doing well, but we can expand even more in terms of some of the application solution, the vertical market we can go after.

If I may just follow up for a second. Jensen, will you be using Intel's foundries to make high-end chips like the Grace Platform or more importantly, Vera Rubin, the kind of best-in-class semiconductors that right now you have made with Taiwan Semi?

Well, we've always evaluated Intel's foundry technology, and we're going to continue to do that. But today, this announcement is squarely focused on these custom CPUs. With this partnership, with this agreement, we're essentially going to be a major customer of Intel server CPUs. This is the very first time. At the moment, we buy CPUs, ARM-based CPUs from TSMC. And the x86-based PCI Express CPUs are sold openly in the marketplace. In the future, we will buy x86 CPUs from Intel and we would fuse it with NVLink into our rack scale system. So we're going to become a very large customer of Intel CPUs. The second thing is that we're going to be quite a large supplier of GPU chiplets into x86, Intel x86 CPU SoCs. And so in that particular case, we're going to be a supplier into a market segment we've never addressed. In the server, we're going to be a customer, a major customer of Intels, and we'll integrate it into NVLink 72 and resell CPUs essentially. And so this is going to be a great growth business opportunity for both of us.

Your next question comes from Ian King of Bloomberg.

Thank you very much for doing this is interesting times we're living in. I wondered if you could talk a little bit about how long you've been working on this agreement. And then obviously, you talked a lot about custom solutions and custom parts. Those don't happen overnight. When might we get to the point where we're seeing devices in the end markets for sale, please?

The 2 technology teams have been discussing and architecting solutions now for probably coming up to a year. And the 2 architecture teams -- well, it's 3 architecture teams are working across, of course, the CPU architecture as well as product lines for server and PCs. And so the architecture work is fairly extensive. And the teams are really excited about the new architecture. And so the teams have been working a while, and we're excited about the announcement today.

Your next question comes from the line of Michael Acton with Financial Times.

Gentlemen, why can't you commit to Intel as a foundry for your most advanced AI chips at this point? And does this pave the way for sort of deeper manufacturing collaboration or not? Are you confident Intel is going to get there? And then secondly, I'd be interested what sort of involvement did the Trump administration have in this agreement, if any?

The Trump administration had no involvement in this partnership at all, and they would have been very supportive, of course. And today, I had the opportunity to tell Secretary Lutnick, and he was very excited and very supportive of seeing American technology companies working together. I think Lip-Bu and I would both say that TSMC is a world-class foundry. And in fact, we're both very successful customers of TSMCs. And the capabilities of TSMC from process technology, their rhythm of execution, the scale of their capacity and infrastructure, the agility of their business operations and just all of the magic that comes together for being a world-class foundry supporting customers of such diverse needs is really quite extraordinary. And I can't -- you just can't overstate the magic that is TSMC. But today, our conversation today, our partnership today is completely focused. It is 100% focused on the custom CPUs that we're building for the data center that now has NVLink capabilities and can connect to the NVLink and the NVIDIA AI supercomputing ecosystem. And it's completely focused on mobile SoCs for consumer PCs that now fuse the world's best CPU and the world's best GPU for consumer products. That segment, the first segment, of course, the data center CPU segment is probably something along the lines of $30 billion a year or so. In the case of -- and this is going to -- this combination of Intel and our technology is going to address a fairly significant swath of that because it is the fastest-growing segment. And we all can agree that the future computing is going to be about AI through and through. And so this is an exciting partnership for the data center market. And then for the consumer market, it's 150 million laptops sold each year, and we're now going to combine the best CPU and the best GPU. And so it's really, really exciting. Lip-Bu?

Yes. I think clearly, this is historical. And this is also my 6 months as Intel CEO. And from day 1, Jensen and I will work on it, and then we accelerate that process and then two teams work together to this game-changing opportunity. It's a deep partnership, and we're looking forward for multiple ways we work together.

Next question comes from Laura Bratton with Yahoo Finance.

I'm really curious about which manufacturing process these new CPUs will be made on. I know that Lip-Bu, you said that 14A is only going to go forward if it has meaningful volume or customer commitment. I just wonder, can you comment about, yes, which manufacturing process the CPUs would be made on? And I know you said this is strictly a product announcement, but can you all comment at all on whether this might pave the way for NVIDIA to collaborate with Intel Foundry services in the future? And that's all.

Yes. I think this announcement is more on the product collaborations. And clearly, like Jensen mentioned, TSMC has been a great partner, long-time partner for NVIDIA and also for Intel. So we're going to continue doing that. And I think this kind of -- in terms of process, I think later on, we can describe more. But I think right now, we are focused on collaborations. And then a certain date, then we can have more announcement down the road when the product is ready.

Yes. I think it's safe to say that the partnership that we're entering into is going to address some $25 billion, $50 billion of annual opportunity. And so this is a very significant partnership, and we're completely focused on that. With -- one of the things that I will say is that our ARM road map is going to continue. And we're committed -- we're fully committed to the ARM road map. We have lots and lots of customers for ARM. We're building the next generation of Vera -- the next generation of Grace called Vera, and we have the next generation after that. We have exciting CPUs that we're building based on ARM. We're building ARM, of course, robotics processors. Our latest one is called Thor. It's used for robots and of course, for autonomous driving. We also have a new ARM product that's called N1. And that product is -- that processor is going to go into the DGX Spark and many other versions of products like that. And so we're super excited about the ARM road map, and this doesn't affect any of that. NVIDIA's architecture accelerated computing covers just about every CPU architecture. And our most important interest is for whatever general purpose computing platform that has market reach, we would like to be able to accelerate it to its fullest capability. And so today, we have the benefit of partnering with Intel on a CPU platform that unquestionably has the largest enterprise, industrial space, cloud, consumer footprint of any CPU in the world. And so a really exciting partnership, and we're going to revolutionize this general purpose computing platform by adding and fusing the NVIDIA accelerated computing and AI computing architectures.

The next question comes from Stephen Nellis with Reuters News.

I had a question for Jensen and Lip-Bu. Jensen, why did you feel it was appropriate or necessary to also make an equity investment in Intel along with this product collaboration? And Lip-Bu, this is now sort of a string of equity investments we've seen from folks, and we expect other ones from potential partners or foundry customers in the future?

I appreciate that question because we thought it was going to be such an incredible investment. This is a big partnership, and we think it's going to be fantastic for Intel. It's going to be fantastic for us. And we're building revolutionary products that's going to address some $50 billion annual market. And so how could we, on the one hand, be excited about the products and how revolutionary they are. On the other hand, not be excited about the opportunities ahead. And so we're delighted to be a shareholder. We're delighted to have invested in Intel. And the return on that investment is going to be fantastic, both, of course, in our own business, but also in our equity share of Intel. And I think it's going to be fantastic for Intel. It just reflects how excited we are about this partnership.

Thank you, Jensen. I think to answer your question, I think clearly, as I mentioned, my top priority, top 10 priority, one of them is to strengthen my balance sheet and that's -- I'm focused on that. And then secondly, in this particular situation, I think, first of all, I'd like to thank Jensen for the confidence in me. And then our team and Intel will work really hard to make it a good return for you. And more important, it's a strategic partnership to drive the products and go to market together to win. So that, I think, is very meaningful for us.

The next question comes from Robbie Whelan with WSJ.

Congratulations. There have been a lot of questions about whether or not NVIDIA will someday use Intel as its foundry partner for its most advanced AI chips. But with these CPUs that we're talking about under this partnership, will TSMC be fabricating most of those CPUs for the foreseeable future? And then also just really quickly, what's the bigger addressable market under this partnership, data centers versus PCs and edge computing? In other words, do you expect to be making more CPUs for PCs under this new arrangement or more CPUs for data centers?

Lip-Bu, do you want to take the first part?

Sure. So I think in terms of the -- as we mentioned earlier, this is more the product collaboration announcement. We both saw a lot of respect for TSMC, C. C. Wei, Morris Chang and we continue to work with them. In terms of the Intel Foundry, we continue to make progress. And then in terms of the yield performance, 18A, 14A, clearly, we want to qualify and then we're going to decide whether this is the right one for doing our foundry. So I think we continue to improve at the right time, Jensen and I will review that. But overall, I think we're going to continue driving our success on the process side and then win the customer confidence and trust and then one step at a time.

Yes. I think one of the things that I would also add is that Intel has the Foveros multi-technology packaging capability. And it's really enabling here. And the reason for that is because as we all know, NVIDIA's GPU technology is based on TSMC's foundry. And this is one of the extraordinary things that you can do, connecting NVIDIA's GPU die chiplet with Intel's CPUs in a multi-technology packaging capability and multiprocess packaging technology. And so it's really a fabulous way of mixing and matching technology. And that's one of the reasons why we're going to be able to innovate so quickly and build these incredibly complex systems and deliver it as multi-chiplet systems packages. And so I'm really excited about that. In terms of the size -- go ahead.

I think, Jensen, you brought up a good point about our advanced packaging, Foveros and also the EMIB is a really good technology, and we will definitely continue to refine it and make sure that's reliable and the yield improvement. And so I think that part definitely we will explore the collaboration opportunity.

Yes. With respect to the size of the market, the data center market and the PC market are both large. And we're going to build revolutionary products, first-of-its-kind products, nothing of its kind has ever been built before for the x86 market. And so I think the -- if my recollection is correct, the data center CPU market is about $25 billion or so annually. And just the notebook market is 150 million notebooks sold each year. And so that kind of gives you a sense of the scale of the work that we're going to do here. We're going to address the -- in terms of the consumer market, we're going to address a vast majority of that consumer PC market, consumer PC notebook market. And with respect to the data center, we're going to bring NVLink, which is the scale-up interconnect, the fabric of NVIDIA, the computing fabric of our company. We're going to bring that capability to Intel. And so I think these are going to be revolutionary products, and we're looking -- I know that all of us working on it are super excited about it. The architects working on it are super excited about it. And so we're looking forward to telling you more about it over time.

The next question comes from Edward Ludlow with Bloomberg.

Jensen, I appreciate you talked a lot about the addressable market. Could you explain how NVIDIA participates in the economics of x86 because you make money on ARM-based CPU, right? So if you could explain how it will work for NVIDIA on the top and bottom line, that would be great for. And Lip-Bu, congratulations. You've been in Silicon Valley, so to speak, for a long time, right? If you stand on the Intel roof, you can look across the freeway at NVIDIA. Would you just explain the culture and sentiment inside Intel today in reaction to this new partnership and what it means for the trajectory of you and your staff?

In the case of the data center the server CPU, it's like us buying Grace CPU from TSMC, integrating it into our rack scale systems and selling that. It's basically the same idea. So we're now instead of -- for x86, we don't buy any CPUs. We let the market sort it out. And the CPUs are really sold as discrete servers, separate servers that are then connected with our GPUs in the data center. And that architecture, basically using PCI Express retimers and things like that, basically PCI Express retimers and repeaters essentially. Instead of building servers like that, that really don't have the ability to scale up to NVLink 72 large fabric systems, we now are able to do that with Intel x86 CPUs. And so we'll buy those CPUs from Intel and then we'll connect it into super chips that then becomes our compute nodes that then gets integrated into a rack scale AI supercomputer. In the case of our consumer PC, we will sell -- the current idea is to sell NVIDIA's GPU chiplet either in a pass-through way with Intel or sold to Intel. And that is then packaged into an SoC. And so we buy a server die, server chip on the one hand, I guess, server chip on the one hand. We sell a GPU chiplet on the other hand. And in both cases, it expands the market for Intel very significantly and it expands the market for NVIDIA as well.

And then in terms of your question about the culture changes at Intel, and first of all, this is a new Intel culture I'm trying to build, and it's going to be engineering focused and extending my relationship with Jensen from a Cadence NVIDIA partnership in terms of drive innovation. And now we are so excited to have this partnership to collaborating to the engineering on x86 and also the GPU accelerator and then on the AI side and with NVLink. So I think there's a lot of engineering collaboration together. The culture I want to have is really lean, fast moving and so that we can match up with the Jensen fast-moving culture. So I think that's something that I'm looking forward to build that culture that can match each other to drive the best solution for the market.

[Operator Instructions] Your next question comes from Kristina Partsinevelos with CNBC.

Jensen, you spoke about the Arm relationship, which is great. So it's continuing and maybe the reaction today was a little overdone. But given SoftBank's position across Arm, Intel and now your partnership with Intel, is there just like some type of broader coordination that I'm missing here? And then I just have a follow-up on China.

Yes. This today should have no impact on Arm. And with respect to the second question, not that I'm aware of. There were no communications with anybody else, except for between Lip-Bu, myself and the technical teams that we're working on this partnership. And we kept it really quiet. Obviously, it's a very substantial partnership. This is going to expand the market opportunity for Intel in AI infrastructure that is largely unexposed to them today, and it's going to expose to Intel in the consumer notebook market where really exquisite GPUs are necessary. And so these 2 markets are unexposed to Intel today, and it's going to be brand-new growth markets for Intel. And so I think -- and all the due diligence that we've -- between our 2 teams and all the work that we did gave us a lot of confidence about the future of Intel. And so we're really betting on -- well, I've become quite a significant shareholder because we believe in this, and we have confidence in them to create -- to partner with us to create these amazing products. But all of these discussions were -- had no relationship to any of the things that you were talking about.

And just a quick follow-up. Intel definitely, we know faces different regulatory constraints than you do. And all the stories that are coming out of China is just constantly on CNBC. We're talking about all the time. But is that part of the calculus here that Intel's difference in regulatory constraints would help you in the medium to long term?

I don't think there's any relationship there either. And I don't think there'll be any impact either way.

The next question comes from [indiscernible] with [indiscernible] Information.

My question is for Jensen. I was curious what types of NVIDIA customers are interested in the x86 architecture for the CPU? And do you expect any customers that currently use the ARM CPU to switch to x86 in the future?

ARM in the world's CSPs is growing. But the vast majority of the world's CSPs are still x86. The vast majority of cloud instances for enterprise users are still x86. And so I think the x86 footprint is still quite large. And NVIDIA addresses it in 1 of 2 ways. In the case of ARM, we could scale up to a full rack scale NVLink system. In the case of x86, we address it through external PCI Express retimers, and we scale up to NVLink 8. And so in the case of x86, we scale up to NVLink 8. In the case of ARM, we scale up to NVLink 72. And so now we could -- with x86 scale up also to NVLink 72. And so I think this is a really great growth opportunity for both of us. And it also creates a product that for many customers who are still x86 based and basically, the vast majority of the world's enterprise is still x86 based, they now have state-of-the-art AI infrastructure.

The next question comes from Eva Du with Washington Post.

Since President Trump, manufacturing in the United States is such a big push for him and both your companies have committed to multibillion-dollar investments in this area. Could you talk a bit about what are realistically the prospects of manufacturing your chips in America? Like what proportion of your chips do you expect to be made in the U.S. in the near future? And what are sort of the challenges to doing more of the production here?

Lip-Bu, would you like to go first?

Sure. Clearly, we -- and clearly, we like Trump -- President Trump focus on manufacturing in U.S. But I think it's important to address that and then the opportunity we have in front of us. But meanwhile, we also have the footprint for Intel globally. And so in the way we just meet customer requirement, include the NVIDIA and then so that they have the flexibility, which best suitable for them. And then meanwhile, we continue to improve our yield performance. And also the other part is the advanced packaging we just talked about. I think it's a great opportunity for both of us.

This concludes the question-and-answer session. I'll turn the call to Mylene for closing remarks.

I want to thank all of you for joining us today in this historic day. It's a historic partnership. I want to thank Lip-Bu for his leadership and the management team of Intel that we've had the great privilege of working with architecting two really exciting product lines and architecting this partnership. We're going to go and address a new computing era where accelerated computing and AI are essential to every aspect of computing, whether it's in the data center and the cloud or in mobile devices and personal computers. I'm super excited to start the projects and our partnership. I want to thank Lip-Bu again and the Intel team for this exciting announcement and this exciting new partnership. Lip-Bu?

Yes. Thank you. First of all, I want to thank Jensen and NVIDIA for the trust and support of Intel, and we will work hard to make sure that this will be a great success for both of us. I think more exciting for me is the collaboration, the best of the acceleration AI and also the x86 and then using the NVLink to scale. And I think this is a new compute platform that we are moving forward. And I'm super excited about the opportunity in front of us and a lot of execution, we're going to be doing that. And then stay tuned. We're going to update you when the time come. But I just want to thank all of you for attending this announcement together.

Thank you, Lip-Bu.

Thank you.

Thanks, everybody.