The fund, to be operated by Intel's venture capital arm, will focus on technologies that allow content such as movies and music to travel wirelessly between electronic devices around the home, Intel said on Tuesday.
Intel stands to profit handsomely should PC technology, which is heavily reliant on Intel chips and Microsoft Corp software - spread into televisions, DVD players and stereos.
Major PC makers and computer chip companies, unsatisfied with thin margins and slowing sales in traditional computer businesses, are pushing actively into consumer electronics.
"We want to sell Intel architecture and Intel semiconductor technologies into the consumer electronics industry, and we looked at what's required to make that happen," said John Miner, president of Intel Capital.
A stake fund of $200 million, he said in an interview, "is certainly enough to help get the ball rolling in that direction."
The fund's formation is timed to coincide with the start of the Consumer Electronics Show in Las Vegas, the annual convention that serves as a showcase for the latest in personal technology.
At the convention, Intel is expected to announce plans to supply chips for use in digital televisions, an area that is the focus of the growing battle between consumer electronics heavyweights such as Sony Corp and PC suppliers like Hewlett-Packard Co, Dell Inc and Gateway Inc.
Intel has formed an investment fund, called the Digital Home Fund, to hold its $200 million investment. The money is expected to be funnelled into dozens of companies around the world.
In the past, Intel has established niche funds to back major initiatives, like 64-bit processors and networking and communications.
Intel's $200 million investment is likely to focus on technologies that can physically connect electronics devices to the PC, and translate video and audio into formats that computers, televisions and stereos can understand, said Bob O'Donnell, director of personal technology for research firm IDC.
"How do I get videos that I created on my PC and maybe edit on my PC to play back on my big screen TV," O'Donnell said. "There's really very few things that can do that right now."
Intel, however, faces tremendous opposition from established consumer electronics companies, who see their devices - not the PC - as the true Center-piece of home entertainment.
Indeed, PC companies have stumbled in their past efforts to push out of the PC room and into the TV room. Intel recently killed a line of Intel-branded consumer electronics, and had to retreat after backing a home wireless networking technology , called HomeRF, that went nowhere.
These days, however, Intel executives see the stars aligning in their favour. For one, a high-speed wireless networking technology called Wi-Fi has become a big hit for home users, making it easy to share broadband Internet connections between computers.
Internet services for legally downloading music and movies are catching on, and handheld devices to play such media are becoming more powerful and less expensive. Additionally, the rise of digital television is turning TV content into a format that can easily be sent over computer networks.
"We're not predicting the death of consumer electronics companies. We're just stating that their industry is in transition," said Scott Darling, an Intel Capital vice president. "We think we have an opportunity to participate."