- Intel shares rise 7% on Tuesday after CEO announces new partnership with Amazon.
- Intel will help design and manufacture AI chips for AWS data centers.
- The deal is said to be multi-year and worth billions of dollars.
- Intel to postpone construction of manufacturing plants in Poland and Germany
Intel (INTC) Intel is actually in a good moment. On Monday, Intel shares gained 6.4% thanks to $3 billion in funding through the U.S. Department of Defense’s Secure Enclave program.
On Tuesday, INTC shares rose 7% after it became known that Amazon (AMZN) had chosen Intel’s foundry unit to produce a new suite of custom artificial intelligence (AI) chips for its Amazon Web Services (AWS) cloud computing business.
In a note to employees, CEO Pat Gelsinger called the deal a multi-billion-dollar partnership for chip design and manufacturing services.
The Dow Jones Industrial Average (DJIA), of which Intel is the smallest member, opened 0.3% higher on Tuesday before turning lower. The performance lagged the S&P 500, up 0.4%, and the NASDAQ Composite, up 0.6%, but represented a new all-time high for the index.
The market starts Tuesday on a friendly note after US retail sales for August rose 0.1% on a monthly basis, while -0.2% was expected. The figure shows that a recession is not imminent, but it is also not high enough to scare Fed governors and prevent them from cutting the federal funds rate by 50 basis points on Wednesday, as many now expect.
Intel stock news
Amazon’s AWS unit has been experimenting with designing its own data center chips in recent years and is now putting several of them to use. Intel already produces Xeon Scalable processors for AWS and will now also make custom Xeon 6 chips using Intel’s 3 node.
The new partnership will see Intel use its 18A process to create an “AI fabric chip” for AWS in partnership with chip designers from both companies. Gelsinger then told employees that Intel would use its 18AP and 14A manufacturing processes to help AWS on future chip projects.
This partnership with Amazon follows Monday’s news that an additional $3 billion will be allocated to Intel for a secure manufacturing program in which Intel will focus on the design and manufacturing of chips related to U.S. military products. While funding also comes from the CHIPS and Science Act of 2022, this $3 billion is outside of the $8.5 billion already set aside for Intel’s foundry investments.
Gelsinger also said he would postpone investments in foundries in Poland and Germany.
In a Reuters report on Tuesday, German Chancellor Olaf Scholz said Intel would “stand firm” regarding its proposed $33 billion manufacturing plant in Magdeburg, although Intel has decided to postpone construction for two years while it puts its house in order.
KeyBanc Capital Markets analyst John Vinh said he was “encouraged” by the announcements as it shows management is being aggressive in terms of cost control.
Intel Stock Forecast
Intel shares are up for the third consecutive session. It’s hard to say whether this rally has legs, as all the gains have been news-related. Either way, bulls are now eyeing the $24.90 level as a potential endpoint. That level showed support on several occasions in late 2022 and early 2023. A break above here would also send INTC above the 50-day simple moving average (SMA) for the first time since late July.
One good sign, however, is that INTC stock broke above other recent range highs on August 2 and August 30, so it is showing that a short-term rally is clearly here for now.
INTC daily stock chart
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
