Intel Shares Surge 6% Following Plans to Separate Its AI Chip Manufacturing Subsidiary

Intel has disclosed plans to separate its AI chip manufacturing subsidiary, Intel foundry business, to function independently. According to the company, the move aims to revitalize and reposition the foundry business to generate external funds.

Following the announcement, Intel shares (INTC) surged by over 6% in extended Monday trades. The share jumped from $19.86 to hit $23.30 in after-hours trading.

Intel Spins Off Its Foundry Business Into Independent Entity, Sparking Over 6% Jump for Shares

In a memo to its employees, Intel announced plans to separate its AI-based manufacturing foundry business into an independent entity.

According to the announcement, Intel Foundry will function independently with a separate board of directors. This move is part of the company's broader reorganization and revitalization strategies.

In the memo, the firm's CEO, Patrick Gelsiinger, said the plans would allow Foundry to raise and evaluate external funds to support its operations.

Further, Gelsinger mentioned that reorganization will alleviate the foundry business's struggles. It will also drive efficiency, boost profitability, and reposition the company with more leverage within the competitive market.

Gelsinger stated: As I've said before, this is the most significant transformation of Intel in over four decades. Not since the memory to microprocessor transition have we attempted something so essential."

The shares recorded a 6.4% increase amid the Intel Foundry spin-off news. According toTradingView data, INTC rose from its market opening price of $19.86 to hit $23.30 in after-hours trading.

Intel Bags More Achievements To Scale Over Past Challenges

The firm is one of the prominent semiconductor companies worldwide. However, it falls below its top rivals, including Nvidia and AMD, in major technological trends such as cloud and AI.

As part of its efforts to boost its presence in the AI space, it declared a collaboration with Amazon Web Services. This partnership will kick off next year and focuses on developing custom AI chip models (18A).

The firm noted that the partnership will run under a multiyear, multibillion framework covering product and wavers from Intel."

Intel also announced that it received $3 billion from the Biden-Harris administration for the Secure Enclave award. The award will allow Intel to manufacture chips for the Defense Department of the US military.

In addition, it serves as direct funding from the government's CHIPS and Science Act for the Secure Enclave program.

Founded in February this year, Intel Foundry is a subsidiary of Intel that manufactures AI-based chips. Before now, the foundry business develops its AI chips without outsourcing any external production entity.

Intel's plans include selling some of its stake in Altera, a programmable chip manufacturing firm it purchased in 2015. Intel revealed losses that exceeded multibillion dollars within the past year. Moreover, its stock plummeted by almost 45%.

The firm announced about $7 billion in net operating losses in August for its chip manufacturing subsidiary. Moreover, its second-quarter earnings report fell below investors' estimates.

Subsequently, the firm declared a 15% reduction in its workforce to control the dwindling earnings.

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