Intel shares soar on Apple chip deal report. Here's why it signals a total pivot for chipmaking

Intel and Apple appear to be on the brink of a significant partnership that could see Intel supplying chips for Apple's devices, representing a notable change in the semiconductor industry. According to a recent report from the Wall Street Journal, discussions between the two tech giants have been ongoing for over a year, with a preliminary agreement reportedly established in recent months. Following the news, Intel's stock experienced a remarkable boost of nearly 14%, while Apple shares increased by 2%. Both companies have refrained from commenting on the matter. Chip analyst Ben Bajarin from Creative Strategies expressed strong confidence in the likelihood of the deal, stating, "I 100% believe this is going to happen. I don't know when." If this agreement materializes, it would mark a significant endorsement of Intel's previously underperforming chip foundry segment. Intel's stock has surged over 200% this year, showcasing a turnaround in its fortunes. For Apple, this development signifies a pivotal moment as it currently relies exclusively on Taiwan Semiconductor Manufacturing Company (TSMC) for its advanced chips. However, with the increasing demand for AI chips, TSMC's production capacity is facing limitations, prompting Apple to enhance its in-house silicon capabilities. Bajarin noted that Apple is TSMC's second-largest client, surpassed only by Nvidia, and emphasized that "Intel is the only place that can scale up capacity as a viable second source." Intel is rapidly increasing its production capabilities, with a new fabrication facility in Chandler, Arizona now in high-volume operations, utilizing its latest 18A technology, which aims to compete with TSMC's 2nm offerings. Bajarin indicated that Apple may wait to utilize Intel's next-generation 18A-P technology, expected to be ready as early as next year. Historically, Intel's foundry business has faced challenges, including delays and low production yields, raising doubts about its ability to serve external clients. However, Bajarin believes that Intel has now successfully navigated these difficulties and can be seen as a credible alternative source for chip manufacturing. Despite the potential implications of an Apple-Intel partnership, TSMC's operations are unlikely to be significantly affected, as they are currently operating at full capacity. Nevertheless, TSMC's CEO has recently acknowledged Intel as a formidable competitor, suggesting a potential shift in the competitive landscape. Furthermore, Apple executives have explored Samsung's new chip facility in Texas, underscoring the competitive nature of the advanced chip market. With only Samsung, Intel, and TSMC capable of producing cutting-edge chips for AI, the demand continues to outpace supply, highlighting the urgency for these companies to scale their operations effectively.