The investment represents a significant commitment to Intel's turnaround efforts.

Nvidia joins Japanese investment giant SoftBank and the US government in backing the once-dominant chipmaker, which has fallen behind in recent years after missing key technology shifts.

President Trump's administration surprised the tech industry last month by taking a 10 percent equity stake in Intel, recognizing the strategic importance of the company that powered the PC and internet revolution with its processors.

It is very rare for the US government to take shares in private companies, and Trump has signaled he will be willing to do more such deals that he sees as strategically necessary.

"This is a game changer deal for Intel as it now brings them front and center into the AI game," said Dan Ives of Wedbush Securities.

"Along with the recent US government investment for 10 percent, this has been a golden few weeks for Intel after years of pain and frustration for investors," he added.

Intel largely missed the smartphone boom and failed to develop competitive hardware for the AI era, allowing Asian manufacturers TSMC and Samsung to dominate the custom semiconductor market.

Most notably, Intel was blindsided by Nvidia's rise as the world's leading AI chip provider.

Nvidia's graphics processing units (GPUs), originally designed for gaming consoles, have become the essential building blocks of artificial intelligence systems, with tech giants scrambling to secure them for their data servers and AI projects.

The partnership announced Thursday will focus on creating custom data center and PC products designed for AI applications. Nvidia will purchase Intel common stock at $23.28 per share, subject to regulatory approval.

After the news dropped, Intel's stock price was up by more than 25 percent, to $31.25 a share on Wall Street.

"This marks a fusion of two world-class platforms," said Nvidia CEO Jensen Huang. "Together, we will expand our ecosystems and lay the foundation for the next era of computing."

Intel CEO Lip-Bu Tan, who took over in March amid layoffs and market challenges, welcomed the investment.

"We appreciate the confidence Jensen and the Nvidia team have placed in us," he said.

The Malaysia-born tech veteran has acknowledged the difficulty of Intel's turnaround, particularly as US-China trade tensions complicate the semiconductor landscape.