Intel (INTC) is rising 3% today in the wake of a report which stated that Nvidia (NVDA) and Broadcom (AVGO) are evaluating INTC's chip-production methods.

The latter development could indicate that NVDA and AVGO are considering having Intel manufacture a significant number of their chips.

A technician soldering components for a semiconductor board.

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Nvidia and Broadcom, which both sell large numbers of AI chips, are testing Intel's ability to produce complex semiconductors, Reuters reported. More specifically, they are evaluating INTC's advanced 18A methods of making these products. AMD (AMD) is also reportedly conducting such tests but may be at an earlier stage of doing so.

NVDA and AVGO are attempting to determine if they can sign long-term manufacturing deals with Intel. Under such arrangements, Intel could be paid "hundreds of millions of dollars" to make advanced chips for the two huge semiconductor designers, Reuters stated.

In 2023, NVDA CEO Jensen Huang reported that his firm had tested Intel's production techniques and had received positive results.

Intel has already made chip-production deals with Amazon (AMZN) and Microsoft (MSFT).

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In recent weeks, it has been reported that Broadcom could be interested in buying Intel's chip design and marketing units, while there have been indications that Taiwan Semiconductor (TSM) is considering taking a controlling stake in INTC's chip-making business.

While we acknowledge the potential of INTC, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than INTC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ ALSO 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock

Disclosure: The author owns shares of AMZN but has no intention of trading them in the next 48 hours. This article is originally published at Insider Monkey.