Intel manufactures custom AI chips for Amazon, with US stocks rising more than 10% after hours

Intel, mired in a crisis, is frequently rumored to have good news.

According to media reports on Monday, Intel not only finally met the qualifications to manufacture semiconductor components for the Pentagon, securing a contract worth as much as $3.5 billion, but also will be manufacturing custom AI chips for Amazon, reaching a multi-year cooperation framework on products and wafers. As a result, Intel's stock price soared 6.4% at the close on Monday, with a further increase of over 10% in after-hours trading.

Establishing Intel's Foundry as an Independent Division and Gaining Government Support

Firstly, Intel will be manufacturing custom AI chips for Amazon, reaching a multi-year cooperation framework on products and wafers. Intel CEO Pat Gelsinger announced that Amazon's AWS (Amazon Web Services) has become a customer of Intel's chip foundry business, and this cooperation is expected to bring business to Intel's new factories in the United States and help the company turn around its current predicament.

According to a statement released by both parties on Monday, Intel and AWS will jointly invest in developing a custom semiconductor for artificial intelligence computing, namely the "fabric chip." This collaboration involves a multi-year, multi-billion-dollar investment framework and will leverage Intel's 18A process, an advanced chip manufacturing technology.

CEO Gelsinger stated in an interview, "Today's news is very important. Amazon is a demanding customer with very advanced design capabilities."

Secondly, Intel has received government support. The Biden administration allocated up to $3 billion to Intel through the "CHIPS Act" to support its development of the "Secure Enclave" microelectronics technology project, aimed at providing stable advanced chip supply to the U.S. Department of Defense and intelligence agencies. Through this project, Intel is expected to secure more government contracts, including a potential $3.5 billion contract to manufacture semiconductor components for the Pentagon.

Thirdly, Intel will establish Intel Foundry Services as an independent division. In order to attract more customers, Intel plans to separate its foundry business (IFS) from its other businesses and turn it into a wholly-owned subsidiary. This move aims to demonstrate to potential customers that IFS is an independent supplier, especially for companies that compete with Intel, allowing them to cooperate more confidently.

Fourthly, Intel is adjusting its expansion plans to focus on core markets. Intel is further reducing its overseas expansion plans. The company announced the suspension of new factory construction projects in Germany and Poland, with the delay expected to be determined by market demand, possibly lasting up to two years. In addition, the factory in Malaysia will be completed but will only be operational when market conditions are suitable. However, the company remains committed to expansion plans in Arizona, New Mexico, Oregon, and Ohio in the United States.

Facing pressure from declining sales and financial losses, Intel announced last month that it would lay off 15,000 employees and plans to save $10 billion in costs. Additionally, Intel has also suspended shareholder dividends These adjustments show that Intel is focusing its resources on advancing its core business and controlling expenses.

Last month, Intel released a very bleak second-quarter report. The financial report showed that Intel's performance in the second quarter and guidance for the third quarter both fell short of expectations. The company also announced significant layoffs, suspended dividend payments, leading to the largest single-day drop in the company's stock price in decades. Analysts say this is one of the worst financial reports in Intel's history. Nevertheless, Intel's leadership remains committed to advancing its revival plan and striving to regain market share.

Previously, despite some progress in Intel's revival plan, investors remained skeptical about the company's prospects. After years of setbacks in competition and the loss of technological leadership, the current market value is now less than $90 billion, far below the $2.9 trillion of its competitor NVIDIA