MediaTek jumps 10% on $3.5 billion Nvidia deal

MediaTek has long been known as the world's biggest smartphone chip company by market share, primarily competing with Qualcomm. However, the company has recently sought to diversify by designing custom chips for data centres, a market where hyperscalers and other tech companies are increasingly building their own AI workload chips. This new partnership with Nvidia positions MediaTek as an emerging player in this space, potentially challenging Broadcom, a market leader.

The $3.5 billion investment from Nvidia, in the form of convertible bonds, adds fuel to a near 200% rally in MediaTek's shares this year. The deal's strategic importance lies in Nvidia's NVLink Fusion platform, which MediaTek will offer to customers. This allows MediaTek's custom semiconductors to integrate with Nvidia's AI infrastructure, keeping Nvidia central to AI even as companies pursue their own chips.

Looking ahead, the collaboration extends to 'local AI computing'—chips for PCs and car systems. MediaTek's June guidance of $2 billion in custom AI chip revenue this year and an $80 billion total addressable market by 2027 remains in question, as CNBC has asked whether the Nvidia deal changes that outlook. The two companies' joint efforts suggest a deepening relationship, with Nvidia's CEO Jensen Huang praising MediaTek as 'one of the world's great semiconductor companies.'