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Intel and Amazon Expand Partnership: Time to Buy These Iconic Tech Stocks?

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As markets rise in anticipation of the Fed cutting rates tomorrow, Intel (INTC - Free Report)  and Amazon (AMZN - Free Report)  have helped lead the broader rally among tech stocks after announcing plans to expand their partnership on Monday.

Intel’s stock had popped +8% in today’s trading session after recently falling to a 10-year low of $18 a share in August.

Meanwhile, Amazon shares were up as much as +2% in early morning trading and are now sitting on gains of over +20% for the year with AMZN edging toward $200.

Zacks Investment Research
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Partnership Overview: Enhancing AWS Cloud Services  

With Intel having a long-standing partnership to support Amazon’s cloud segment Amazon Web Services (AWS), the iconic tech companies have a new agreement to develop custom AI chips.

The chips will be developed using Intel’s 18A process which is designed to enhance performance and energy efficiency in a bid to boost the AI-as-a-service (AIaas) offerings of AWS.  

Perfect Timing for Intel

Losing ground to many of its semiconductor peers, Intel stated its partnership to provide AI-powered chips for Amazon will be a multiyear, multibillion-dollar deal. The timing couldn’t be better as it gives Intel another opportunity to regain its footing as a major chip manufacturer after drastically losing market share to Nvidia (NVDA - Free Report)  and AMD (AMD - Free Report) .

This may also quiet fears of Intel being able to preserve enough cash and gateways to growth to support the costly operations of its foundry business as a chip producer for other companies. These concerns have largely loomed despite Intel having $29.27 billion in cash & equivalents at the end of Q2 2024 and $206.2 billion in total assets compared to $85.77 billion in total liabilities.

However, Intel’s sales and operating performance have steeply contracted in recent years although a modest rebound is expected in fiscal 2025. Notably, to capitalize on the collaboration with Amazon, Intel will be splitting its foundry business into an independent subsidiary to improve the segment’s efficiency.

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Amazon’s Upper Echelon Growth & Balance Sheet

Luckily for Intel, it has continued a lucrative partnership with a cash cow in Amazon, with the e-commerce leader and tech conglomerate having over $89 billion in cash & equivalents. Furthermore, Amazon has $554.18 billion in total assets versus $318.37 billion in total liabilities.

Zacks Investment Research
Image Source: Zacks Investment Research

The Magnificent Seven-themed tech stock is expected to see high double-digit EPS growth in FY24 and FY25 with total sales projected to increase by over 10% in these fiscal years respectively. Notably, Amazon’s top line is edging toward a whopping $700 billion.

Zacks Investment Research
Image Source: Zacks Investment Research

Final Thoughts

Amazon and Intel’s stock both land a Zacks Rank #3 (Hold). The continued partnership between these tech giants should be lucrative for both companies and certainly adds to their prospects of being viable long-term investments.

However, there could be better buying opportunities in Amazon’s stock after a sharp YTD rally while it may be too soon to say Intel shares are at an inflection point in regards to a continued rebound.

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