Nvidia's stock edged up nearly 1% on Monday following the announcement of a $3.5 billion investment in Taiwan's MediaTek, a move that significantly expands their existing partnership in artificial intelligence (AI) infrastructure and data-center technology. The investment, structured as convertible bonds, marks Nvidia's largest direct investment outside the U.S. and underscores its strategy to embed its technology deeper into the AI hardware ecosystem.
Expanding the partnership
The two companies will deepen their collaboration, with MediaTek adopting Nvidia's NVLink Fusion and newly introduced NVHBM technologies. These tools are designed to improve communication efficiency within data centers, enabling MediaTek's components to integrate more seamlessly with systems used by major cloud and technology firms. Nvidia CEO Jensen Huang described the agreement as a major expansion of an existing relationship, noting that the engineering roadmap now extends a decade into the future.
This investment comes as Nvidia seeks to maintain its central role in AI infrastructure, even as some large customers develop their own chips. MediaTek, traditionally reliant on the smartphone market, is pivoting toward becoming a design partner for custom AI processors. The company has already partnered with Alphabet's Google and is collaborating with Nvidia on the RTX Spark laptop chip, part of Nvidia's push into the laptop market.
Financial and strategic implications
MediaTek has forecast AI chip sales of approximately $2 billion this year and aims to capture a 15% share of an $80 billion segment next year. The Nvidia investment follows a similar expansion of cooperation with Amazon, which agreed to deploy an additional 2 million Nvidia components and use Nvidia's connection technology with its own chips. Huang emphasized that the expanded relationship broadens both companies' supply chains, with MediaTek's XPU technology joining Nvidia's supply chain and Nvidia's networking ecosystem becoming part of MediaTek's.
The deal arrives as hyperscalers like Amazon, Google, and Microsoft increasingly develop in-house chips to complement or replace some Nvidia hardware. Despite these efforts, Nvidia continues to project robust growth, expecting sales to rise by more than 70% next year. However, the scale of Nvidia's investments across the AI ecosystem has raised concerns among some investors about potentially circular relationships between chip suppliers and their customers. Huang dismissed such concerns, stating, "This is not circular because obviously they do their own business and we do our own business, and MediaTek is already incredibly profitable, incredibly successful."
Analyst reaction and outlook
Melius Research raised its Nvidia price target to $420 from $400, maintaining a Buy rating. The firm highlighted Nvidia's expectation of over 70% revenue growth next year despite lower gross margins. Nvidia's purchase commitments also surged to $279 billion from $119 billion, with total commitments reaching $366 billion, largely reflecting memory requirements. The company plans to return more than 60% of free cash flow to shareholders, with buybacks expected to increase next year. Melius raised its fiscal 2029 earnings-per-share estimate to $21.11 and based its new target on a multiple of 20 times that estimate, suggesting Nvidia could be approaching another breakout, though concerns about the broader AI trade persist.
This investment is part of a series of strategic moves by Nvidia to solidify its AI dominance. For more context, see Nvidia's $99B AI financing push and Nvidia's 70% growth forecast. The company's expanding ecosystem also influences broader market trends, as seen in Nasdaq's rally on Nvidia's forecast and shifts in AI chip rivalry.
This article is for informational purposes only and does not constitute financial advice.
