- Intel has nixed its plans to spin-off its NEX unit.
- Analysts tell Fierce that a bright AI future has made NEX viable
- Nvidia and U.S. government investments have helped Intel in 2025
Following multiple reports that Intel has dropped plans to sell off its Networking and Communications (NEX) Unit after announcing plans to do just that earlier this year, Fierce decided to ask the analysts why Intel has dropped its hex on NEX.
It comes from a mixture of factors, one of which was “trying to get a buyer for the division that was willing to pay what it was worth,” said J.Gold Associates principal Jack Gold.
Talks with Ericsson, which like many other companies uses Intel’s Xeon processor in its 5G gear, have apparently fallen by the wayside.
“In the past a large portion of NEX revenues were from telco providers like Ericsson that got specialized Xeon processors with networking extensions, and I expect that will continue for now,” Gold. He expects, however, that chips that provide high-speed interconnect for AI networking will provide the NEX unit with more revenue in the future.
“The NEX unit makes chips that goes into the switches and other networking gear used in those data centers,” noted Recon Analytics analyst Daryl Schoolar. There is an “ongoing flood” of data center investments, the analyst said.
Intel realized that its competitors, such as AMD and Nvidia, had significant networking capability in-house and that future AI systems will need high-speed and reliable connectivity to be competitive.
“Nvidia and AMD both have in-house networking units,” said Gold. “They use them to create fully modular AI systems that they can sell. Intel to date has not really done so, but as it looks to be more competitive, including rumored acquisitions in AI chip companies, it will likely be able to benefit from an in-house networking group.”
The other factor would be the U.S. government and Nvidia investments in Intel this year, said Schoolar. “The Nvidia investment is not specifically earmarked for the NEX division, but that investment is around the development of AI solutions that would go into the data center, thus creating a future benefit for NEX by driving demand for more data center networking gear,” the analyst stated.
The U.S. government investment has a more direct impact since the goal of the investment is supposed to strengthen U.S.’s overall semiconductor supply chain. “Offloading the NEX to a non-U.S. company would run counter to the strategic objective of that,” Schoolar concluded.