Intel Partners with Amazon AWS for AI Chip Development

What You Need To Know

Intel Corp (NASDAQ: INTC) has secured Amazon Web Services (AWS), a division of Amazon.com Inc (NASDAQ: AMZN), as a customer for its manufacturing business, potentially bringing work to its new plants under construction in the US. This move supports Intel's ongoing efforts to revitalize the struggling chipmaker.

The two companies will collaborate on a multiyear, multibillion-dollar project to create custom AI chips using Intel's advanced 18A process, an advanced chipmaking technology. Following the announcement, Intel's stock experienced an 8% increase, although it has faced a steep decline of 58% throughout the year. While Intel has decided to delay factory developments in Germany and Poland, it remains focused on expanding its presence in the United States, with active construction ongoing in several states.

To navigate current financial difficulties, Intel is implementing significant cost-cutting measures, including a reduction of 15,000 jobs and plans to save $10 billion. The company is also in pursuit of government funding for military chip manufacturing and plans to separate its foundry services to enhance its appeal to external customers. Additionally, Intel is substantially decreasing its global real estate footprint and may benefit from federal grants supportive of domestic manufacturing. Amidst increasing competition from rivals like Nvidia, which boasts a $2.9 trillion market cap, Intel is striving to restore investor confidence.

Why This Is Important for Retail Investors

1. Boosts Intel’s revenue stream: Securing AWS as a customer could mean a significant increase in Intel’s revenue through long-term, high-value contracts.

2. Strengthens Intel’s turnaround efforts: This deal is a key part of Intel’s strategy to recover from recent struggles, signaling that it remains competitive in advanced chip manufacturing.

3. US manufacturing expansion: Intel’s focus on domestic production, supported by AWS, aligns with efforts to reduce reliance on overseas manufacturing, which could help secure government funding and favorable policies.

4. AI-driven growth: Collaborating with AWS on custom AI chips positions Intel to capture growth in the rapidly expanding AI market.

5. Cost-cutting measures: Intel’s strategic efforts to reduce expenses and streamline operations may further enhance profitability and financial health, despite the current challenges.

6. Competitive positioning: Intel’s focus on strengthening its manufacturing capabilities comes at a crucial time as it competes against Nvidia and other industry leaders.

7. Potential government support: Pursuit of federal funding for military chip manufacturing and domestic expansion could provide additional financial stability and growth opportunities.