Intel teams up with Amazon. Is chip stock a buy now?

After being on the ropes for much of August and September, Intel (INTC 2.85%) suddenly has a banner week.

Shares rose yesterday after the company secured $3 billion in funding from the CHIPS Act, and are rising again today after announcing a new partnership with Amazon (AMZN 1.08%).

At 12:23 p.m. ET, the stock was up 4.4% on the news. Investors see this as a sign the company is reinventing itself after announcing a massive restructuring in its second-quarter earnings report.

Image source: Getty Images.

What’s up with Intel and Amazon

After the market closed yesterday, Intel announced that it is expanding its strategic collaboration with Amazon Web Services, announcing a multi-year, multibillion-dollar partnership for Intel to produce custom chips for Amazon, including an artificial intelligence (AI) chip factory and a Xeon 6. chip designed to handle compute-intensive AI workloads.

The news gives Intel’s foundry business a much-needed win. It lost billions of dollars a year and lagged behind rivals such as Taiwan Semiconductor.

The AI ​​fabric chip will use Intel’s 18A process, which makes nodes up to 18 angstroms (1.8 nanometers).

What it means for Intel

Coming directly on the heels of the CHIPS news, the expanded partnership with Amazon is another significant win for Intel Foundry.

However, investors should not get carried away by Intel’s rally. The company still needs to execute and do it in a timely, cost-effective manner, which has been a problem for them in the past.

Intel certainly isn’t going away, and a vast ecosystem depends on and supports its chip design and foundry businesses, but a turnaround will take a lot more than consecutive favorable announcements.

Watch for your next earnings report, due out at the end of October. While the numbers will likely be ugly, the company may offer some insight into the progress it is making in revamping the business.