Intel Wins Amazon AWS Chip Manufacturing Deal, Stock Soars 6.36%
SANTA CLARA, Calif. – September 17, 2024 – Intel Corporation announced a significant win today, securing a deal with Amazon Web Services (AWS) to manufacture custom AI chips for the cloud giant. Thenews sent Intel’s stock soaring 6.36% to close at $20.91 per share, with after-hours trading showing anadditional near 8% gain. This surge in value pushed Intel’s market capitalization to $892.23 billion, surpassing the value of Colgate-Palmolive, a company often referred to as the real toothpaste factory.
The deal with AWS is expected to be worth billions of dollars for Intel’s foundry business, which will receive payments for design services and manufacturing. Intel CEO Pat Gelsinger, in a memo to employees, highlighted the importance of this partnership, stating that AWS will be a major customer for Intel’s foundry operations.
This news comes alongside other positive developments for Intel. The company has also secured a $3.5 billion federal grant from the U.S. government to manufacture chips for the Pentagon. These grants, part of the Chips and Science Act, are aimed at boosting domestic semiconductor production and reducing reliance on foreign suppliers.
The partnership with AWS is particularly noteworthy as it involves the use of Intel’s cutting-edge 18A process technology. AWS has already designed several AI chips for its data centers, and at least one of these, known as the Artificial IntelligenceStructure Chip, will be manufactured using this advanced process. Intel expects to receive further design orders from AWS as it rolls out its 18AP and 14A manufacturing processes.
However, the news of these wins comes amidst ongoing cost-cutting measures at Intel. The company’s board of directors has decided to sell itsprogrammable chip business, Altera, and has also announced a two-year pause on its chip factory project in Germany. Additionally, Intel plans to suspend its project in Poland and is expected to issue notices to approximately 15,000 employees who were previously announced for layoffs in August. These measures are part ofIntel’s efforts to improve efficiency, profitability, and competitiveness in the market.
Despite these cost-cutting measures, Intel has emphasized that its plans to expand manufacturing in the United States remain unchanged. The company intends to keep its manufacturing operations, including its foundry business, within the company. Gelsinger has also indicated that thefoundry business will be given greater independence, allowing it to attract external capital. Intel plans to establish it as a separate subsidiary, overseen by an operating committee, with its financial performance already being reported separately from the design business earlier this year.
In addition to these developments, Intel is also taking steps to strengthen its core CPUtechnology and restructure various departments, including its automotive and edge businesses. On Monday, the company also announced that it had received up to $3 billion in direct funding from the Chips and Science Act as part of its security protection measures.
The news of Intel’s wins with AWS and the U.S.government, coupled with its commitment to cost-cutting measures and strengthening its core business, suggests a renewed focus on growth and competitiveness for the semiconductor giant. This comes at a time when the global chip industry is facing significant challenges, including supply chain disruptions, geopolitical tensions, and increasing competition from other players like TSMC andSamsung. Intel’s ability to navigate these challenges and secure key partnerships will be crucial to its future success.
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