Amazon's cloud computing division, AWS, is expanding its collaboration with chip manufacturer STMicroelectronics to ensure a stable supply of semiconductors for its data center infrastructure. Shares of STMicro jumped over 4% on the news.

In an announcement on Monday, STMicroelectronics stated it will provide AWS with a range of semiconductor products. These include chips designed for high-bandwidth connectivity and for efficient power management, which are essential for operating large-scale data centers.

Amazon Web Services is intensifying its partnership with Franco-Italian semiconductor firm STMicroelectronics to procure vital chip technologies for its data centers.

STMicro will furnish AWS with various semiconductors, such as components enabling high-bandwidth connections and those managing power efficiently for hyperscale data center functions, the chipmaker disclosed in a statement.

The agreement grants AWS warrants to purchase up to 24.8 million ordinary shares of STMicro. These warrants will vest gradually, linked to payments made for STMicro's products. AWS holds the option to exercise these warrants in single or multiple transactions over a seven-year span, starting at an initial price of $28.38 per share. This marks at least the second instance of AWS investing in a semiconductor firm.

The worldwide expansion of data centers to accommodate artificial intelligence applications is generating fresh opportunities for chip companies. Leaders in advanced AI chip design and production, like Nvidia, Advanced Micro Devices, and Taiwan Semiconductor Manufacturing, have been primary beneficiaries. Similarly, manufacturers of established analog chips are experiencing growing demand for AI data center uses, including power management, sensors, and thermal control. Infineon Technologies recently projected AI-related revenue to reach €2.5 billion by its 2027 fiscal year, a significant increase from current levels.

STMicro, which also supplies components to Tesla and Apple, recently issued a first-quarter revenue forecast that exceeded analyst expectations. The company observed a rebound in demand from consumer electronics clients towards the end of last year, following an extended downturn. Nonetheless, STMicro's stock price declined after its report indicated a mixed recovery across various market segments. CEO Jean-Marc Chery noted during an analyst call that conditions in the automotive market remain volatile.