Citi still believes Intel should exit the foundry business

Citi analyst Christopher Danely reiterates a Neutral rating on Intel with a $25 price target after the company issued a press release following its board meeting. Intel announced a multi-billion deal with Amazon Web Services to supply AWS with custom Xeon chips and produce an artificial intelligence fabric chips, the analyst tells investors in a research note. The firm does not count the Xeon win as a true “foundry” win since these chips are something Intel already makes. Citi is also concerned “customizing” a Xeon could be a lower margin product. Intel also announced it has been awarded up to $3B in business from the U.S. government , “which is a mild positive,” the firm adds. However, Citi does expect this to be material given that it is is over several years. The firm continues to believe Intel should exit the foundry business.