On the face of it, yesterday's deal hands Intel a seat closer to the AI table it has been locked out of for years. Intel's stock jumped 23 per cent after the announcement, giving the cocaine nose jobs of Wall Street something to cheer about. However, the WSJ says this was just a tactical win at best and what Intel needs is to cut itself in two.

While TSMC built a global empire by focusing solely on making chips for others, Chipzilla insisted on keeping its chip design and manufacturing under the same roof. That quaint notion has cost it dearly.

Since 2021, former Intel chief executive Pat Gelsinger has been trying to peddle its foundry business as a standalone operation, but it has floundered. Despite pulling in $4.4 billion in revenue last quarter, the division posted a $3.2 billion loss and most of its business still comes from the rest of Intel. 

When Nvidia supremo Jensen Huang was asked if this new deal meant real foundry traction for Intel, he dodged the question. He gave a polite nod to Chipzilla’s chip-packaging tricks, but nobody believes that is going to pull the foundry operation out of the ditch.

What is more telling is what was not said. Neither side wanted to talk about who is going to manufacture the new chips. That silence suggests even Nvidia is not fully on board with trusting Intel’s fabs.

If Chipzilla finally split its design and manufacturing, it could make deals like this Nvidia one work. Nvidia could team up with Intel’s design teams and then build with whoever had the best fabs, whether that is TSMC, Samsung or Intel itself. There would be no conflict of interest.

A split would also make rivals like AMD or Qualcomm more likely to throw business Intel’s way, knowing they would not be feeding a direct competitor. Right now, the only reason Nvidia is willing to work with Chipzilla is because Intel has become irrelevant in AI chips and poses no threat.

Letting investors back either the fabs or the designs would give the US government, which now owns nearly 10 per cent, a cleaner way to boost domestic chip output. That is where the real national security concerns are, not in flogging more laptop CPUs.

Carving out the fabs would be painful. They are bleeding cash and the financing required would make a circus act look easy. Yet it is the only way these plants will ever get competitive with TSMC.

There is hope that Nvidia’s cash might attract others to join in. If that happens, it could bankroll the next generation of fabs that Intel desperately needs to stop being the industry punchline.