- Intel set to build multi-generations of custom data center and client CPUs in partnership with NVIDIA. Collaboration improves Intel's competitiveness and turnaround, reinforcing AEM (SGX:AWX)'s outlook.
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Intel-NVIDIA collaboration improves Intel's competitiveness and reinforces AEM's outlook.
- For data centers, Intel will build custom x86 CPUs that Nvidia will integrate into its AI infrastructure platforms. For personal computing, Intel will build x86 system on chips that integrate Nvidia RTX GPU chiplets. In addition, the substantial US$5bn equity investment by Nvidia in Intel, is a strong vote of confidence in Intel's long term outlook and provides capital to accelerate execution of its roadmap, in our view.
- Together, these developments should strengthen Intel's positioning in the x86 market, supporting its turnaround story and creating downstream demand for testing, where AEM is the plan of record provider for Intel's testing and stands to benefit from higher test requirements.
Implications for AEM are positive, though we note the benefit will be volume dependent and subject to ramp-up timing.
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- Nonetheless, given NVIDIA's scale in the data center market, the collaboration is likely to be meaningful, and particularly relevant for AEM once the current non-cancellable purchase orders with Intel are fully drawn down through FY27.
- There could also be additional upside if the partnership were to extend to NVIDIA outsourcing chip manufacturing to Intel Foundry, which would drive further demand for AEM's solutions, though there is currently no indication that Foundry involvement will materialise.
Maintain BUY with target price of S$2.10.
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