The deal gives Nvidia a way to capture more of the custom-silicon market while keeping customers connected to its broader networking and infrastructure ecosystem, according to Ming-Chi Kuo.

  • MediaTek will use Nvidia’s NVLink Fusion platform to develop custom XPUs that can plug into Nvidia’s rack-scale AI systems, according to an expanded partnership announced Monday.
  • Nvidia is investing $3.5 billion in MediaTek.
  • Shares of MediaTek closed 10% higher on Tuesday, while NVDA stock dropped over 1% in premarket trading.

Nvidia’s expanded partnership with MediaTek could help the chipmaker extend its AI infrastructure dominance into the growing market for custom AI chips, according to supply-chain analyst Ming-Chi Kuo.

The companies announced Monday that MediaTek will adopt Nvidia’s NVLink Fusion platform, allowing customers to develop custom XPUs that can connect to Nvidia’s NVLink-based, rack-scale AI systems. 

Nvidia is also investing $3.5 billion in MediaTek convertible bonds, part of a $3.9 billion offering by the Taiwanese chipmaker.

The partnership is significant because it allows Nvidia to participate in custom silicon without having to design every accelerator itself, Kuo noted. MediaTek can develop customized chips for customers while Nvidia provides the underlying connectivity and rack-scale infrastructure needed to integrate those chips into AI factories.

“For MediaTek, Nvidia’s mature rack-scale system ecosystem means it doesn’t have to start from scratch,” Kuo said, making the strategy “more executable.”

For Nvidia, the bigger opportunity could be turning NVLink into a broader industry standard for AI infrastructure, Kuo said. Custom-chip developers can use Nvidia technology to connect their XPUs to Nvidia CPUs and other components, keeping those systems tied to Nvidia’s ecosystem even when the underlying accelerator is not an Nvidia GPU.

New Revenue Stream For Nvidia

The strategy also gives Nvidia another potential revenue opportunity around its infrastructure, including interconnect, networking and system technologies, rather than relying solely on selling GPUs.

Recent reports have described Nvidia’s approach as effectively creating a “toll booth” for custom AI chips: companies can design their own silicon, but still use Nvidia’s technology to connect and deploy it at scale.

Reuters reported that the arrangement allows MediaTek customers to use NVLink Fusion to create AI chips that integrate with Nvidia’s computing systems, reducing engineering costs and development time.

That could become increasingly important as hyperscalers and AI companies seek custom silicon to optimize workloads and reduce reliance on off-the-shelf GPUs. Nvidia has already been pushing NVLink Fusion as a way to bring custom chips into its infrastructure, with MediaTek joining other partners in the effort.

Shares of MediaTek closed 10% higher on Tuesday. NVDA stock dropped over 1% in premarket trading. On Stocktwits, the retail sentiment for NVDA was ‘extremely bullish.’

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