Intel's stock surged 7.9% in after-hours trading on Monday as CEO Pat Gelsinger announced that the company will reorganise its foundry business into an independent subsidiary.
This move could allow the chip-maker to raise outside capital as part of a broader restructuring as Intel aims to streamline its foundry business, which has cost the company approximately $25 billion over the past two years.
As part of the restructuring, Gelsinger said that Intel will also reduce its stake in Altera, giving the newly formed Foundry unit its own operating board and financial autonomy.
This step, Gelsinger explained, will provide the company with an opportunity to explore independent sources of funding and streamline operations, making it easier to spin off the foundry unit into a separate company if needed.
The move comes amid Intel's struggle to recover lost market share in its core PC and data center business while competitors like Nvidia dominate the rapidly growing AI chip market.
Prior to this announcement, Intel's stock had dropped nearly 60% in 2024 due to underwhelming financial results and layoffs affecting over 15% of its workforce.
As part of its cost-cutting measures, Intel will pause its semiconductor fabrication projects in Poland and Germany for approximately two years while maintaining U.S. operations.
The company also received up to $3 billion from the U.S. government under the CHIPS and Science Act to further a semiconductor project with the Department of Defense.
The initiative is part of the government's efforts to bolster domestic chip production amid increasing geopolitical risks surrounding Taiwan.
Additionally, Intel announced an expanded partnership with Amazon Web Services (AWS), in which it will produce custom chips, including AI processors, for AWS. This deal could potentially position Intel to gain a stronger foothold in the AI server chip market, currently dominated by Nvidia.
Gelsinger noted, “All eyes will remain on us. We need to fight for every inch and execute better than ever before. Because that’s the only way to quiet our critics and deliver the results we know we’re capable of achieving.”