Nvidia CEO Jensen Huang at the GTC AI Conference in San Jose, California, on March 18.Josh Edelson / AFP via Getty Images

Nvidia, the semiconductor company powering the artificial intelligence revolution, said Thursday that it was buying a $5 billion stake in ailing rival Intel.

The two companies will also begin a partnership to develop chips together for PCs and data centers.

Intel shares surged more than 30% in pre-market trading on the announcement. Nvidia shares advanced about 3%.

The announcement Thursday from Nvidia comes just weeks after the U.S. government purchased a 10% stake in Intel, worth nearly $9 billion, and after Japan's SoftBank invested $2 billion.

"This is a game changer deal for Intel as it now brings them front and center into the AI game," wrote tech analyst Dan Ives in a note Thursday. "Along with the recent U.S. Government investment for 10% this has been a golden few weeks for Intel after years of pain and frustration for investors."

"Today's announcement further strengthens the US lead in the AI Arms Race against China as Intel now goes from a laggard to a catalyst," Ives concluded.

It is highly unusual for the U.S. government to hold positions in private companies outside of major financial crises. But Intel has been struggling in recent years with multiple CEO changes and strategy shifts as the firm fell far behind Nvidia and other rivals such as AMD and Broadcom in the mobile phone space and AI arms-race.

Intel CEO Lip-Bu Tan, named in March, faced a call from President Donald Trump in August to resign. Trump said Tan was "highly conflicted" after Sen. Tom Cotton, R-Ark., sent a letter to the company expressing "concerns" about Tan's past work for Chinese firms.

"There is no other solution to this problem," Trump added in the social media post.

Days later, Tan and Intel management met with Trump in the Oval Office. Trump's tone toward Tan changed dramatically after that encounter. "The meeting was a very interesting one. His success and rise is an amazing story," Trump wrote in a Truth Social post.

A week later, the administration and Intel announced the unprecedented investment in the company, using money from the Biden-era CHIPS Act.

At the same time, Nvidia CEO Jensen Huang has been a familiar face at Trump administration events. On Wednesday night, Huang attended the state dinner at Windsor Castle alongside Trump and King Charles III.

As part of Trump's visit to the U.K., Nvidia announced it was plowing more than $14 billion into AI and data center infrastructure around the country.

At a news conference Thursday alongside U.K. Prime Minister Kier Starmer, Trump gave Huang a shoutout: "You're taking over the world, Jensen."

Nvidia to invest $5B in Intel and develop chips with onetime rival