Intel's stock prices surge following announcement of chip partnership with Amazon
The announcement arrived following Intel's earlier declaration that it could receive up to $3 billion in financing under the CHIPS and Science Act for manufacturing military-grade chips.
Intel Foundry and Amazon Web Services have agreed to collaborate on a custom chip design for AWS, as stated in an official release. This partnership involves a long-term, multi-billion-dollar contract.
Intel Foundry will manufacture an AI processing chip for AWS using Intel's 18A technology, as per the statement made by Intel CEO Pat Gelsinger on Monday.
Previously ruling the chip market with a firm grip on PCs and Macs, Intel has had a hard time keeping pace with the shift towards mobile computing. Companies like Qualcomm and Texas Instruments, leading players in the mobile chip sector, have surpassed Intel in market value.
And then there's Nvidia, which capitalized on the AI boom to become one of the most financially prosperous publicly traded companies worldwide.
Intel's alliance with AWS is part of its strategy to regain its lost ground. The deal, coupled with the $3 billion funding from the US government for domestic chip manufacturing and military chip production, "highlights our advancements towards creating a robust foundry business", Intel commented in the statement.
Intel continues to expand its facilities in Arizona, Oregon, New Mexico, and Ohio, but has temporarily halted production in Germany and Poland for approximately two years.
After the announcement, Intel shares increased by 6% in after-hours trading.
Gelsinger also shared updates on Intel's mission to cut $10 billion by 2025. To compete with Taiwan's TSMC in the global chip market, Intel has revamped its business model.
According to the release, Intel has already surpassed half of its goal to reduce its workforce by 15,000 employees by the end of the year. Additional layoffs are anticipated in mid-October. Moreover, Intel plans to decrease its global real estate presence by about two-thirds by the end of 2024.
The Intel-AWS partnership is expected to bring significant revenue to Intel's business.The deal, along with the government funding, is seen as a crucial step in strengthening Intel's foundry business.
