Intel Lands Major AWS Deal For AI Chips; Shares Soar 8%
The deal, unveiled by Intel CEO Pat Gelsinger in a memo to employees, will see Intel producing an "AI fabric chip" for AWS using its cutting-edge 18A manufacturing process
Intel has won a significant victory for its foundry business, signing Amazon Web Services (AWS) as a key customer to manufacture custom artificial intelligence chips.
The deal, unveiled by Intel CEO Pat Gelsinger in a memo to employees, will see Intel producing an "AI fabric chip" for AWS using its cutting-edge 18A manufacturing process. This partnership marks a crucial step forward for Intel’s turnaround strategy, which has struggled to attract high-profile clients for its foundry business until now. Following the announcement, Intel’s shares surged by approximately 8 per cent in after-hours trading.
The AWS cloud computing division, which already designs chips for its data centers, is expected to work closely with Intel on additional custom chip designs using future 18AP and 14A processes. This collaboration positions Intel as a key player in the competitive AI and cloud computing market, where demand for advanced chips is rapidly increasing.
In his memo, Gelsinger outlined further steps Intel is taking to regain profitability and market competitiveness. These include cost-cutting measures, such as selling a stake in its programmable chip division, Altera, and pausing construction on chip factory projects in Germany and Poland for two years. However, Intel affirmed that its plans to expand manufacturing facilities in the United States remain on track.
Intel also plans to establish its foundry business as an independent subsidiary with its own operating board, a move designed to provide the unit greater autonomy and the ability to attract external capital. This comes as Intel seeks to solidify its foundry operations as a key part of its broader restructuring, which began in 2021.
Earlier this year, the company separated the financial performance of the foundry from its design division, signaling its intention to give the unit a more distinct role within the organization.
Adding to its financial strength, Intel has secured up to USD 3 billion in funding from the US CHIPS and Science Act under the Secure Enclave program. Despite these positive developments, the company is also preparing for significant layoffs, with notices expected to go out in mid-October to about 15,000 employees, as part of previously announced cost-cutting efforts.
(Inputs from Reuters)
