Intel Stock Surges on AI Chip Deal with Amazon and Foundry Business Overhaul

Intel's stock shot up on Tuesday before markets opened, following the announcement of a new partnership with Amazon Web Services (AWS) and plans to restructure its foundry business. These moves are part of Intel's efforts to turn around its operations and become more competitive in the tech world, especially in the fast-growing AI industry.

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Intel’s CEO, Pat Gelsinger, revealed that the company’s foundry division will be making custom artificial intelligence (AI) chips for Amazon's cloud services. The foundry business, which has faced some struggles, will also become a separate subsidiary within Intel to improve its performance and help the company focus more on key areas.

Gelsinger explained, “By creating a separate subsidiary, we’re giving our foundry customers and suppliers more independence from Intel’s main business. This change also allows us to seek outside funding and manage our resources better, ultimately helping us grow and create more value for our shareholders.”

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Experts, like JP Morgan analyst Harlan Sur, see this restructuring as a logical next step for Intel. Sur said that setting up the foundry as its own business could lead to greater transparency and better decision-making. He also hinted that this change could potentially lead to Intel spinning off the foundry division entirely in the future.

“As Intel makes its foundry a separate unit, it’s preparing for more strategic decisions down the road, which could include splitting the business in a few years,” Sur noted.

Intel plans to form a dedicated board for the foundry subsidiary, which will include independent directors to oversee its operations.

Alongside these business changes, Intel is also cutting costs. Gelsinger provided an update on the company’s plan to reduce its workforce by 15,000 employees by the end of 2023. This is part of an ongoing effort to slim down the company, and Intel has already reached over half of its target through voluntary retirement and separation offers. However, Gelsinger mentioned that more employees will be affected, with notifications expected in mid-October.

Intel is also planning to reduce its global real estate footprint, aiming to cut or exit about two-thirds of its properties worldwide by the end of the year.

The announcement of the AI chip deal with Amazon and the changes to the foundry business were welcomed by investors, pushing Intel’s stock up nearly 7% in premarket trading. These developments show Intel’s push to regain its competitive edge, especially in the booming AI and semiconductor industries.

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