Intel Corp. shares experienced their largest single-day gain in a month following a report that Alphabet Inc.'s Google plans to rely on the chipmaker for more than three million specialized artificial intelligence chips by 2028. The news, first published by the Information, highlights Intel's growing role in the AI hardware market.
Google's Decision to Tap Intel
According to the Information, Google decided to use Intel to manufacture some of its tensor processing units (TPUs) after months of testing Intel's technology. The report cited two unnamed sources familiar with the matter. This move comes as Taiwan Semiconductor Manufacturing Co. (TSMC) struggles to meet demand for its manufacturing capacity, prompting firms like Google to seek alternative suppliers.
Market Reaction
Intel shares soared as much as 13% to $112.37 in New York trading. The stock has roughly tripled in value this year, driven by optimism around AI spending and the company's turnaround efforts under CEO Lip-Bu Tan. Intel recently delivered a sales forecast that exceeded Wall Street expectations, indicating that it is finally benefiting from the AI boom.
Intel's Foundry and Packaging Business
While the order for three million chips is significant, it would not immediately transform Intel's money-losing manufacturing business. The volume is equivalent to the output of a major factory in a month or less. However, large companies like Google signaling trust in Intel's technology could bolster its reputation and help attract other customers.
Intel has informed investors that it has accumulated a backlog worth billions of dollars for packaging work. This step in semiconductor production, which involves enclosing chips in casing and preparing them for connection to other circuitry, has become increasingly important. Combining chips in the same package is now seen as a way to achieve better performance, especially for data center components.
Nvidia Also Testing Intel's Technology
The Information also reported that Nvidia Corp. is testing whether Intel's technology can be used to manufacture a forthcoming processor that combines four graphics chips into a single unit. Nvidia did not immediately respond to a request for comment. Intel declined to comment on the report, and Google did not respond to a request for comment.
Outlook
Intel's progress under CEO Lip-Bu Tan has been notable. After securing major investments last year to strengthen the company's balance sheet, Tan is now delivering on promises to improve operations. The potential partnerships with Google and Nvidia could further solidify Intel's position in the semiconductor industry, though the financial impact may take time to materialize.
