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

Apple and Intel are reportedly closing in on a deal that would see Intel make some of the chips for the iPhone maker's devices, marking a major shift in the chipmaking landscape.

Talks between the two companies have been brewing for more than a year, with a preliminary agreement reached in recent months, the Wall Street Journal reported Friday, citing people familiar with the matter.

Intel shares soared nearly 14% on Friday. Apple shares added 2%. Both companies declined to comment.

"I 100% believe this is going to happen. I don't know when," chip analyst Ben Bajarin of Creative Strategies said in an interview.

If it comes to fruition, the deal would be the most notable vote of confidence yet for Intel's once-struggling chip foundry business. Intel shares are up more than 200% this year.

For Apple, it would be the end of era. The iPhone maker currently relies solely on Taiwan Semiconductor Manufacturing Co. to make all the most advanced chips for its devices.

But TSMC's wafer capacity can only go so far, amid soaring demand for AI chips that has sent every major tech company into a semiconductor frenzy. Apple is no exception, ramping up its in-house silicon program in recent years to make nearly all the core chips in iPhones, Macs and more. Apple is TSMC's second-largest customer, topped only by Nvidia, according to Bajarin.

"Intel is the only place that can scale up capacity as a viable second source," Bajarin said.

Intel is indeed ramping up capacity quickly, with a new chip fabrication plant now in high-volume production in Chandler, Arizona. It's making chips there on 18A, its most advanced node, or production process, which is meant to rival TSMC's 2nm node that's currently only manufactured in Taiwan. TSMC also has multiple new chip fabs in Arizona, where Apple has committed to making some of its silicon.

Bajarin said Apple is most likely to wait to make chips on Intel's next node, called 18A-P, which could scale as soon as next year. He called Intel's current 18A node "a little bit rough" and said 18A-P "cleans a lot of stuff up."