Intel, Amazon expand partnership with multi-billion dollar deal, new AI chips

Intel Corporation has unveiled significant strategic initiatives aimed at strengthening its position in the AI and semiconductor sectors. The company will spin off its foundry services into a new subsidiary, designed to attract external investments and foster growth.

This reorganization is complemented by a major expansion of Intel’s partnership with Amazon Web Services (AWS). Under a multi-year, multi-billion dollar agreement, Intel will produce custom artificial intelligence (AI) chips and Xeon 6 processors for AWS. The AI chips will leverage Intel’s advanced 18A technology, while the Xeon 6 processors will be manufactured using Intel 3 technology. This collaboration underscores a commitment to enhancing U.S.-based chip manufacturing and advancing AI technology.

Intel’s stock surged significantly following these announcements, reflecting strong investor approval. The company’s shares experienced their largest two-day gain in over twenty years.

The partnership with AWS will see Intel produce a custom AI fabric chip for the cloud services giant. This chip will utilize Intel’s 18A process, the most advanced available for external customers. AWS has also committed to expanding its data center operations in Central Ohio, investing an additional $7.8 billion to support its 10.3 billion dollar investment in the state since 2015.

Furthermore, Intel announced that it will receive up to $3 billion in direct funding from the U.S. government’s CHIPS and Science Act under the Secure Enclave program. This funding is aimed at supporting the production of advanced technology semiconductors within the U.S.

Intel CEO Pat Gelsinger highlighted the strategic realignment in a memo to employees, emphasizing the need to drive efficiency and profitability. As part of the restructuring, Intel plans to sell a stake in its programmable chip business, Altera, and pause construction at its chip factory projects in Germany and Poland.

The new foundry unit will operate with greater independence and will have its own operating board. Intel will continue to focus on its core CPU technology and reorganize its automotive and edge businesses. The company also plans to issue layoff notices to approximately 15,000 employees by mid-October.