Advanced Micro Devices Inc. shares jumped Tuesday after the chip maker announced that its Epyc central processing units would be adopted by the world’s largest public cloud provider, Amazon Web Services. AMD

AMD, +3.92%

 shares surged to an intraday high of $21.65 before cooling off to gains of about 4.5% Tuesday afternoon. Amazon.com Inc.

AMZN, +0.92%

 shares were up 0.4%, and the S&P 500 index

SPX, +0.63%

 was up 0.2%.

Tuesday’s rally in AMD shares coincided with the announcement that AWS’s Elastic Compute Cloud, or EC2, is now using AMD’s Epyc datacenter chips. When AMD launched the Epyc server chips in June 2017, shares of the chip maker rallied 24% on the week. “The availability of multiple AMD Epyc processor-powered instances on Amazon EC2 instances marks a significant milestone in the growing adoption of our high-performance CPUs with cloud service providers,” Forrest Norrod, AMD’s general manager for datacenter and embedded solutions, said in a statement. Amazon said using Epyc chips will lower costs as they are 10% less expensive than current chips they are using. “Apart from adding to what is already the broadest and most capable set of compute services available in the cloud, these new AMD-based instances give customers an even lower-priced way to run many of the most common applications,” Matt Garman, AWS vice president of Compute Services, said in a statement. The costs were what grabbed analyst Patrick Moorhead’s eye at the chip maker’s San Francisco event Tuesday. “The world’s largest cloud provider offering Epyc is the biggest news of the day,” Moorhead said in an email. “This is a testament to Epyc’s capabilities. I was impressed when AWS said it takes no software or script changes yet delivers a 10% cost reduction.” Don’t miss: Why AMD believes it can challenge Intel in servers He added, though, that Intel Corp.

INTC, -0.88%

 is likely to provide “the lion’s share” of semiconductors for AWS cloud servers. AMD is attempting to battle datacenter-chip leader Intel as well as Nvidia Corp.

NVDA, -0.34%

 , which has built a sizable business providing graphics-processing units for servers. Back in October, AMD and Oracle Corp.

ORCL, +0.47%

 said Oracle’s cloud service would use Epyc chips as a means of being able to offer lower cloud prices to customers. Also, in December, Microsoft Corp.’s

MSFT, +0.20%

 Azure became the first public cloud provider to start using Epyc chips in their datacenters.

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