Intel (NYSE:INTC) shares were 2% higher on Wednesday after the company confirmed plans to split its foundry unit and also announced a chip deal with Amazon.
INTC – Daily Chart
A rally in INTC stock during 2023 was halted in 2024 and the stock has continued to slump with a current price of $21. The $22 level is the obstacle to further gains.
Intel rose on news the company has secured a manufacturing contract from Amazon for its foundry business, where it will design and produce AI chips for Amazon’s cloud division. Intel will deliver the “AI fabric chip” for Amazon, using its 18A process, which is the company’s most advanced manufacturing technology. There were hints that further AWS designs will come later using the upcoming 18AP and 14A processes.
Bloomberg also reported last week that Intel has received $3.5 billion in grants from the Pentagon to manufacture US military chips. Intel has fallen out of favour with investors after losing market share to AMD in the PC and server markets. That has also coincided with an industry from CPUs to GPUs, which drive the AI sector.
The recent contract wins with Amazon and the Pentagon could mark a turning point for Intel, with Amazon’s deal, in particular, being seen as a strong vote of confidence in the company’s chip-making capabilities.
Intel’s attempts to regain its leadership position in chip fabrication have been very capital-intensive, while they have also been hurt by production mistakes. The company is set to create a separate subsidiary for its foundry manufacturing plant. The company has missed out on the AI valuation boom and is looking to recover lost ground.
