- Intel’s stock price surged nearly 4% during early trading following the announcement of a significant chip-making deal with Amazon’s cloud business.
- The deal with AWS is a positive development for Intel and could help the company turn around its struggling foundry unit.
OUR TAKE
The collaboration with AWS marks a pivotal moment for Intel’s foundry unit, signalling a promising upswing that is crucial for the company’s viability in the cutthroat semiconductor industry. The stock price increase following the deal underscores the growing momentum behind Intel’s efforts to establish itself as a key player in the contract manufacturing space.
–Rebecca Xu, BTW reporter
What happened
Intel’s stock price surged nearly 4% during early trading following the announcement of a significant chip-making deal with Amazon’s cloud business, providing a much-needed vote of confidence in its contract manufacturing segment. This partnership is set to produce custom AI chips for Amazon Web Services (AWS) as part of a multibillion-dollar agreement, signalling a substantial expansion of the longstanding relationship between the two tech giants.
The collaboration with AWS is expected to not only enhance Intel’s credibility but also strengthen its position as a supplier of custom AI silicon chips, according to Angelo Zino, a senior equity analyst at CFRA Research.
In related strategic moves, Intel has decided to pause its fab projects in Poland and Germany for approximately two years, a decision that raises questions about the nearly $11.14 billion in subsidies from Germany for its plants. This pause is expected to help boost cash flow, even though the focus on U.S.-based fabs might not be well-received in the EU, as noted by Russ Mould, investment director at AJ Bell.
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Why it’s important
The deal is particularly crucial for Intel, which has experienced a challenging year with its shares slumping nearly 60%. It represents a strategic move as the company, once a dominant player in the chipmaking industry, seeks to reinvent itself through a costly turnaround plan.
Moreover, this development comes at a time when Intel is working to improve its market value, which dipped below the $100 billion mark for the first time in three decades this year. The company’s inability to fully capitalise on AI-driven demand has been a contributing factor to its lagging stock performance, especially when compared to competitors like Nvidia and TSMC.
While the AWS deal is a positive step, analysts suggest that Intel would need to secure contracts with other major players, such as Nvidia and AMD, who are currently TSMC’s clients, to fully establish its foundry business. This would involve manufacturing chips for these companies to compete more effectively in the market.
