Shares of Intel rise after announcement to manufacture AI chips for Amazon
Date
9/18/2024 5:31:26 AM
(MENAFN) Shares of Intel experienced a notable rise before the market opened on Tuesday, following the company’s announcement of a significant move in its foundry business. Intel revealed that it will produce custom artificial intelligence (AI) chips for Amazon Web Services (AWS), aiming to revitalize its struggling foundry division. Intel’s CEO, Pat Gelsinger, communicated to employees that the foundry business would be restructured into a subsidiary. This change is expected to enhance transparency and operational independence while providing the flexibility to explore independent funding sources and optimize capital structures for growth and shareholder value.
Gelsinger highlighted that the subsidiary model would allow for clearer separation between Intel’s foundry operations and the rest of the company, potentially improving decision-making and efficiency. JP Morgan analyst Harlan Sur endorsed this strategy, suggesting that the shift to a subsidiary is a logical progression for better transparency and operational effectiveness. Sur also speculated that this restructuring might eventually lead to a spin-off of the foundry business in the coming years.
In addition to the foundry changes, Gelsinger updated Intel’s cost-cutting initiatives. The company is advancing toward its goal of reducing its workforce by about 15,000 by the end of the year through voluntary early retirement and separation programs. Gelsinger noted that while significant progress has been made, further “difficult decisions” are forthcoming, with notifications to affected employees expected in mid-October. Furthermore, Intel plans to downsize or exit approximately two-thirds of its global real estate holdings by year-end.
The announcement had a positive impact on Intel’s stock, with shares surging nearly 7 percent in premarket trading. This uptick reflects investor optimism about the strategic changes and their potential to improve Intel's financial performance and market position.
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