With the first phase of a trade deal between the U.S. and China agreed upon, the stock market staged a rally on Monday. The Dow Jones Industrial Average (^DJI) was up 0.6% at 1:50 p.m. EST, even as shares of airplane manufacturer Boeing (BA 2.92%) tumbled.
Boeing stock was down following news that the company was reportedly considering reducing or halting production of its 737 Max planes. Meanwhile, shares of chip giant Intel (INTC 1.73%) rose with the broader market after the company announced a significant acquisition.
Boeing might halt 737 Max production
While Boeing has predicted a return to service for the grounded 737 Max as early as January, that outlook doesn't quite mesh with reality. The head of the Federal Aviation Administration recently said in an interview that the plane wouldn't be recertified until sometime in 2020, given the many steps still required to be completed. Now the Wall Street Journal is reporting that Boeing is considering reducing or suspending 737 Max production.
A decision on 737 Max production could come as early as today. The Journal's sources say that management has started to see production cuts as a viable option. Boeing has continued to manufacture the planes without being able to deliver them, which has caused the company to burn through cash. Through the first nine months of 2019, Boeing's free cash flow was a loss of $1.6 billion, compared to a profit of $11.1 billion in the prior-year period.
The newfound openness to production cuts comes after regulators told the company that its time line was unrealistic, according to the Journal. Cutting or suspending production would help Boeing preserve cash, but it could also upend the company's supply chain.
Shares of Boeing were down 3.6% on the news. The stock is now barely up since the start of the year.
Intel splurges on AI chipmaker
While Intel's core business is providing the general-purpose processors that power PCs and servers, demand for specialty chips aimed at artificial intelligence workloads is growing. Intel expects the market for AI chips to exceed $25 billion by 2024. In 2019, the company plans to generate $3.5 billion in "AI-driven" revenue.
On Monday, Intel announced that it had acquired Habana Labs, an Israeli-based programmable deep learning accelerator developer. Intel paid approximately $2 billion. "Habana turbo-charges our AI offerings for the data center with a high-performance training processor family and a standards-based programming environment to address evolving AI workloads," said Navin Shenoy, executive vice president and general manager of the data platforms group at Intel.
Selling graphics processing units used for accelerating AI and other computation-intensive workloads has become a multibillion-dollar business for NVIDIA. Intel is working on a stand-alone graphics chip of its own, but the type of programmable chip designed by Habana could offer performance advantages. Intel claims that the company's Gaudi AI training processor can deliver as much as a fourfold increase in throughput compared to a system with the same number of GPUs.
Intel's growth will depend on capturing additional business from its data center customers beyond its general-purpose server chips. The acquisition of Habana will help the cause. Shares of Intel were up 0.6% following the news.