Nvidia has stopped moving forward with plans to manufacture chips using Intel's 18A production process, according to a Reuters report published Christmas Day. The news sent Intel shares sliding and raises fresh questions about the company's ambitious plan to become a major contract chip manufacturer.

What Happened

According to Reuters, citing two people familiar with the matter, Nvidia recently tested whether it would manufacture chips using Intel's 18A technology but decided against moving forward. The decision comes just months after the two semiconductor giants announced a major collaboration.

Intel shares fell as much as 3.9% on the news before recovering some losses to close down approximately 2% on Christmas Eve.

Intel's Response

An Intel spokesperson told Reuters that the company's 18A manufacturing technologies are "progressing well." The company pointed to several positive developments:

  • Fab 52 in Arizona, the first factory using 18A technology, has entered mass production
  • The 18A process represents the most cutting-edge production technology developed and deployed in the U.S.
  • Other customers, including Microsoft and Amazon, have announced deals for custom chips on 18A

Why It Matters

Intel's foundry business is central to the company's turnaround strategy. Under CEO Pat Gelsinger (who departed in late 2024), Intel invested tens of billions of dollars to build new chip factories and compete with Taiwan Semiconductor Manufacturing Company (TSMC) for contract manufacturing.

Winning Nvidia as a customer would have been transformative:

  • Nvidia is the world's most valuable chip company with a $5+ trillion market cap
  • Its AI chip demand far exceeds what any single foundry can supply
  • A major Nvidia order would validate Intel's manufacturing capabilities

The Nvidia-Intel Partnership

In September, Nvidia and Intel announced what appeared to be a breakthrough collaboration. Under that agreement:

  • Intel would develop custom x86 CPUs for Nvidia's AI infrastructure platforms
  • Intel would create system-on-chips integrating Nvidia RTX GPU chiplets
  • Nvidia committed to investing $5 billion in Intel common stock at $23.28 per share

However, the deal notably did not include a commitment for Intel to manufacture Nvidia chips. The latest report confirms that Nvidia tested the arrangement but decided against it.

Competition with TSMC

Nvidia continues to rely heavily on TSMC for its most advanced chip production. The Taiwanese foundry manufactures Nvidia's H100 and H200 AI accelerators, as well as the upcoming Blackwell generation.

TSMC's manufacturing technology is widely considered the industry's best, and most major chip companies—including Apple, AMD, and Qualcomm—rely on it for cutting-edge production.

Intel's 18A process is designed to compete directly with TSMC's advanced nodes. However, winning customer confidence requires demonstrating consistent quality, yield, and delivery—areas where TSMC has decades of experience.

Other 18A Customers

Despite the Nvidia setback, Intel has announced deals with other major technology companies:

  • Microsoft: Custom chips for cloud infrastructure
  • Amazon: Custom chips for AWS data centers
  • Apple: Reportedly considering Intel for entry-level M-series chips in 2027

However, volumes from these clients are relatively small compared to demands from AI leaders like Nvidia.

Intel's Path Forward

Intel's foundry roadmap includes future versions of 18A (18A-P and 18A-PT) aimed at attracting external customers. The company is also developing the 14A node for 2027, which could offer improved performance.

The key question: Can Intel execute on its technology promises and win customer trust before burning through its significant capital investments?

The Bottom Line

Nvidia's decision to halt Intel 18A testing is a significant blow to Intel's foundry ambitions. While Intel has other customers and insists its technology is progressing well, losing the world's most important chip company as a potential manufacturing partner raises real questions. Intel's path to becoming a major contract foundry just got harder. For investors, the news reinforces the challenges facing Intel's turnaround—and the dominance of TSMC in advanced chip manufacturing.