Intel Corp will pay graphics chip designer Nvidia $1.5 billion (€1.1 billion) to licence its technology, settling a legal dispute and smoothing the way for better competition in PC processors.
The agreement was a major victory for Nvidia, sending its shares up after it received recognition of the value of its high-end graphics technology to Intel.
The deal gives Intel, the world's biggest chipmaker, the right to use Nvidia's technology in its PC chips as graphics processing becomes increasingly important.
Nvidia gets to use some of Intel's technology as it works to build its own PC central processors, using architecture licensed from Britain's ARM Holdings.
Many investors had expected a settlement, but it had been unclear how much Intel might pay Nvidia and the $1 billion payment was not built into the value of Nvidia's stock, said Kevin Cassidy, an analyst at Stifel Nicolaus.
The agreement comes as Nvidia tries to carry the momentum of low-energy chips based on ARM architecture - now ubiquitous in smartphones - into PCs.
Last week, Nvidia announced it is developing an ARM-based PC central processor under the code name "Project Denver" and will aim them at everything from workstations to supercomputers, directly challenging Intel.
The agreement announced on Monday does not give Nvidia the right to make central processors using Intel's prized "x86" technology.
"Those are not our core businesses nor do we have the intention or strategy to go develop those things," Nvidia chief executive Jen-Hsun Huang said in a conference call with analysts.
Nvidia specializes in processors that are ideal for processing complex graphics and has been promoting them to be used for other complicated mathematical tasks, such as medical imaging and weather forecasting.
While traditional central processors found in PCs are designed to make huge calculations very quickly, one after another, graphics processors, or GPUs, excel at carrying out several small calculations at the same time, which makes them handy for specific kinds of tasks.
Nvidia's shares jumped 4.45 per cent after hours after closing up 3.83 per cent. Intel's shares were down 0.2 per cent after hours.
Reuters