Intel Foundry finally has some good news. Has the chipmaker learned its lesson?

of Intel (INTC -1.91%) The stock price crash in early August on news of its earnings report wasn’t much of a surprise. The chipmaker was left behind after years of operating a money-losing foundry business, while storied rivals such as Advanced microdevicesthey gained market share.

Intel has long dominated the computer processor business, but a cultural aversion to risk-taking has prevented the company from expanding this leadership position into other areas. It missed the mobile transition and now seems to be lagging behind in artificial intelligence (AI).

The company actually lost Apple as a customer for its Macs after Apple experienced several years of frustration with Intel’s chip quality and pace of development. Apple also saw an opportunity to improve its battery life and jumped on it Taiwan Semiconductor Manufacturing (TSMC) as a manufacturing partner because TSMC could produce smaller chips.

Intel also missed out on potentially game-changing opportunities, including the chance to invest in OpenAI in 2017. Intel was in talks to take a 15 percent stake in the company for $1 billion. But then-CEO Bob Swan said he was skeptical that generative AI models would hit the market soon enough to recoup Intel’s investment and didn’t close the deal. It was just the kind of short-sightedness and poor judgment that has plagued the company over the past few years.

Similarly, SoftBankthe Japanese mega-investor who funded everything from Uber technologies TO Arm holdshas held talks with Intel about making an AI chip to compete with Nvidia. Those talks broke down after Intel couldn’t meet Softbank’s demands. This, again, is evidence of a familiar pattern of non-standard Intel products.

Intel bulls were a little desperate after some good news to counter all the negativity for some time. They recently got some in the form of two new announcements about Intel’s foundry division. The news caused a 9.2% increase in the share price in two days (September 16-17).

Is this the start of a comeback or just a blip? Let’s take a closer look.

Image source: Getty Images.

Amazon gives Intel a shot in the arm

After business hours on Monday, Intel announced an expanded partnership with Amazon (AMZN -0.14%)saying the two companies will co-invest in a multi-year, multibillion-dollar program for Intel’s foundry to produce custom chips, including an AI material chip, in its upcoming 18A (18 angstrom) process. Additionally, Intel will make a Xeon 6 chip for compute-intensive AI workloads.

Investors should understand that this is not a new relationship. Amazon and Intel have worked together since 2006, so this is an extension of an existing relationship. Still, the announcement is significant because it shows a vote of confidence in Intel’s foundry business from a major customer just when Intel desperately needs one.

It’s unclear how much the expansion would be worth to Intel. The work will take place in Ohio, where Intel plans to build a new semiconductor factory and Amazon has said it will invest $7.8 billion to expand its data center operations.

Intel makes $3 billion in CHIPS money

Amazon’s news followed an announcement earlier in the day that Intel had received $3 billion in direct CHIPS Act funding for the Secure Enclave program, which is run by the US Department of Defense. Intel said the move reflected “continued progress” at its foundry, even as it loses billions of dollars a year in chip production. However, the manufacturing arm is vital to government interests because the federal government prefers to work with an American company that will manufacture its chips on US soil.

This funding is separate from the previous announcement that Intel would receive $8.5 billion from the CHIPS Act for manufacturing.

Can Intel turn it around?

As Intel restructures its business and plays catch-up in the AI ​​era, the most important question for the company is whether it has learned from its mistakes. Can it embrace risk-taking and a culture that values ​​bold thinking instead of just toeing the company line?

Last month, the resignation of CEO Lip-Bu Tan, one of the only executives with any technical expertise in semiconductors, rattled investors, as news outlets reported that Tan had grown frustrated with Intel’s bloated workforce, its use of contracts production and risk aversion. bureaucratic culture. This move provides the latest evidence that the culture still needs an overhaul, and that will take time.

For investors, the two announcements this week are positive steps, but it will take more than that to get the company back on track. The good news is that the stock is finally up enough to even talk about a recovery, but the business will likely take years to recover if it can reinvent itself. The recent bias likely gives the stock an exaggerated boost, as the company still faces plenty of challenges.

However, the transformation of the foundry business is essential. If Intel shows more achievements like the ones above, investors should see the stock continue to move higher.