Shares of Intel Corporation saw a significant surge in premarket trading on Tuesday after the chipmaker unveiled its strategic plans to manufacture custom artificial intelligence (AI) chips for Amazon Web Services. As part of an effort to revitalize its business, Intel's CEO, Pat Gelsinger, announced that the company's struggling foundry business will become a fully-owned subsidiary of Intel, a move that is expected to unlock various benefits and contribute to maximizing growth and shareholder value creation.

In a message addressed to Intel employees on Monday, Gelsinger disclosed that the foundry business would work on creating an AI fabric chip specifically designed for Amazon's cloud services division. This development signifies a key partnership between two tech giants, leveraging Intel's expertise in chip manufacturing to support the growing demand for AI applications in Amazon's cloud computing services.

The decision to transform the foundry division into a subsidiary structure garnered positive reactions from industry experts. Harlan Sur, an analyst at JP Morgan, highlighted that this move was a logical progression to enhance transparency, decision-making, and operational efficiencies within Intel. Sur further noted that the shift to a subsidiary structure might ultimately lead to a spin-off of the business in the coming years.

To ensure independent oversight and effective governance, Intel plans to establish a new board of directors consisting of independent members for the subsidiary. This initiative is intended to provide external foundry customers and suppliers with a clearer separation and greater independence from the rest of Intel.

Alongside the announcement about the subsidiary, Gelsinger also provided an update on Intel's cost-cutting measures and employee reduction efforts. According to Gelsinger, the company is already more than halfway to its target of reducing approximately 15,000 jobs through voluntary early retirement and separation offerings by the end of this year. However, he emphasized that additional difficult decisions will need to be made, and affected employees will be notified in mid-October.

In a bid to optimize resources and streamline operations, Intel also plans to reduce or exit around two-thirds of its real estate globally by the end of the year. The move is part of the company's broader efforts to reposition itself as a leader in the fast-evolving technology landscape and maintain its competitive edge.

The market responded enthusiastically to Intel's announcements, with the company's stock jumping nearly 7% in premarket trading. The positive market sentiment reflects investors' confidence in Intel's strategic initiatives and their potential to rejuvenate the company's business prospects in the increasingly competitive AI and cloud computing sectors.