Intel Partners with Amazon to Produce Custom AI Chips, Boosting Stock Value

Intel stock surges on plans to make AI chips for Amazon

(AP) Shares of Intel are surging before the market opens Tuesday after the chipmaker said its foundry business would make some custom artificial intelligence chips for Amazon Web Services as it attempts to reinvigorate its business. CEO Pat Gelsinger said in a message to employees late Monday that Intel will create an AI fabric chip for Amazon's cloud services division at its foundry business, a struggling division that he said would become a subsidiary of Intel. "A subsidiary structure will unlock important benefits," Gelsinger said. "It provides our external foundry customers and suppliers with clearer separation and independence from the rest of Intel. Importantly, it also gives us future flexibility to evaluate independent sources of funding and optimise the capital structure of each business to maximize growth and shareholder value creation." Harlan Sur of JP Morgan believes that making the foundry business a subsidiary is a logical next step. "We believe this move is a natural progression to drive better transparency and decision making/efficiencies and therefore should not be viewed as a surprise," the analyst wrote in a note to clients. Sur anticipates the shift could possibly lead to a spin out of the business over the next few years. A board that includes independent directors will be created for the planned subsidiary. Gelsinger also provided an update on Intel's cost-cutting efforts. The executive said that the chip maker, through voluntary early retirement and separation offerings, is more than halfway to its workforce reduction target of approximately 15,000 by the end of the year. He added that "difficult decisions" will still need to be made, with impacted employees being notified in the middle of October. Intel also plans to reduce or exit about two-thirds of its real estate worldwide by year's end. Shares of Intel Corp. jumped nearly 7 per cent in premarket trading.

Intel to make custom AI chip for Amazon

Intel has landed a deal with Amazon Web Services to make a custom artificial intelligence processor, marking a potential turning point for the struggling chipmaker. Intel CEO Patrick Gelsinger is betting on diversifying his customer base rather than focusing on one big customer, and the deal with AWS is an encouraging sign. The processor, known as thefabric chip, plays a key role in data centres by linking chips together. Although it is not mass-produced, its quality is crucial. The commitment ofAmazon, a world leader in data centres, to using Intel to produce this essential component is therefore seen as a mark of confidence in the group's technology and know-how. Intel's financial situation has also been a subject of controversy, with only three quarters of sales growth since 2020. The CEO remains confident, however, saying that the bulk of the investment is now behind them and that Intel's technology is ready to generate the orders needed to turn things around.

Intel to power custom AI chips for AWS in multi-billion dollar deal

Leading chip manufacturer Intel signed an agreement with Amazon Web Services (AWS) to manufacture custom Artificial Intelligence (AI) chips. Both companies have co-invested in custom chip designs under a multi-year, multi-billion-dollar framework covering products and wafers from Intel, according to a press release. Intel will produce an AI fabric chip for AWS using its advanced Intel 18A process node. Additionally, it will build a custom Xeon 6 chip on Intel 3, expanding their existing partnership for Xeon Scalable processors. AWS is also planning to invest $7.8 billion to expand its data centre operations in central Ohio, in addition to the $10.3 billion it has already invested in the state. The two companies are also exploring the potential for Intel to produce further designs based on Intel 18A and future process nodes including Intel 18AP and Intel 14A. The partnership follows several major announcements from Intel's board meeting, including, $3 billion in CHIPS Act funding for the U.S. government's Secure Enclave program. The company also plans to establish Intel Foundry, its semiconductor manufacturing vertical, as an independent subsidiary. The company will pause its manufacturing expansion in Poland and Germany for about two years. However, in Malaysia, Intel will complete the construction of a new packaging factory. U.S. manufacturing investments in Arizona, Oregon, New Mexico, and Ohio continue as planned.