Shares of Intel (Nasdaq: INTC) recorded their most significant single-day gain in a month following a report from The Information that Alphabet Inc.'s Google has selected the company to produce over three million custom AI chips by 2028.
According to the Monday report, which cited two unnamed sources familiar with the matter, Google decided to choose Intel to manufacture a portion of its Tensor Processing Units (TPUs) after several months of technical testing.
The report also noted that Intel is securing orders from companies like Google as Taiwan Semiconductor Manufacturing Company (TSMC) faces challenges in meeting robust market demand.
Intel's stock price surged as much as 13% to $112.37 in New York trading. Year-to-date, the stock has risen approximately twofold.
Intel's stock recently reached record highs after the company provided a sales forecast that significantly exceeded Wall Street's expectations, indicating it is finally beginning to benefit from the artificial intelligence investment boom. This optimistic outlook suggests that CEO Pat Gelsinger's efforts to turn around the once-struggling company are gaining traction. After securing substantial investment and improving the company's balance sheet last year, he is now delivering on promises to enhance operational performance.
The Information further reported, citing two unnamed sources, that Nvidia is also testing Intel's manufacturing technology to evaluate its suitability for producing a new type of upcoming processor. This processor is designed to integrate four graphics processing chips into a single package.
However, it remains unclear to what extent Google and other clients will rely on Intel's chip foundry business, as opposed to its packaging services. The foundry business handles semiconductor manufacturing, while packaging services involve assembling and integrating chips into final products so they can function with other components.
Intel has previously informed investors that the backlog of orders for its chip packaging services has reached several billion dollars. Packaging is a stage in the semiconductor production process that has traditionally been considered less critical and less costly than the chip fabrication process, which creates electronic components on silicon wafers. Nevertheless, packaging is becoming increasingly important as the industry recognizes that integrating multiple chips within a single package is an effective way to boost performance, particularly for data center chips.
An order for three million chips will not instantly transform Intel's still-unprofitable foundry business. This volume is roughly equivalent to one month's output, or less, from a large-scale fabrication plant. However, the willingness of major technology firms to entrust their most critical products to Intel for production can help bolster market confidence in Intel's technical capabilities and aid in attracting additional customers.
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