MediaTek shares surged early Tuesday after the chip designer announced a $3.9 billion overseas convertible-bond offering, backed by key artificial-intelligence players including Nvidia and Alphabet, signaling strong investor confidence in the company's AI ambitions.

The stock rose 9.9% to 4,315.00 New Taiwan dollars, equivalent to about US$136, extending a rally that has seen shares triple this year as investors increasingly reclassify MediaTek as an AI infrastructure play rather than merely a smartphone chip supplier.

Nvidia said Monday it has invested $3.5 billion in convertible bonds issued by MediaTek and deepened cooperation across AI infrastructure, personal computers and automotive computing.

Under the expanded partnership, MediaTek will adopt Nvidia's platform to assist customers in developing custom AI processors capable of integrating into Nvidia-based, rack-scale AI systems used by hyperscale cloud providers, cloud-service operators and frontier AI developers.

The announcement comes as MediaTek prepares to begin mass production of its first custom AI chips for data centers later this year, marking a significant push into a market historically dominated by U.S. competitors.

"MediaTek is one of the world's great semiconductor companies, with exceptional expertise in system-on-chip design, connectivity, leading performance and power efficiency," Nvidia founder Jensen Huang said.

The tie-up gives MediaTek a larger role in Nvidia's AI infrastructure ecosystem as it expands its custom-chip business. While the company has not disclosed its customer list, analysts widely associate its custom AI accelerator efforts with Google, whose parent company Alphabet participated in the convertible-bond offering.

This expansion places MediaTek in direct competition with Broadcom, the leading supplier of custom AI chips to hyperscale customers. Encouraged by growing customer interest, MediaTek has raised its 2027 market share target in the data center business to 15% to 20%, up from its previous target of 10% to 15%.

This strategic pivot also reflects MediaTek's effort to diversify beyond smartphones, where it has long competed with Qualcomm. Future AI-powered consumer devices, likely the next major category of AI hardware, could open another battleground with Qualcomm, analysts said