Chipmakers Intel Corp. (INTC) and Advanced Micro Devices (AMD) Thursday announced a $1.25 billion settlement to their antitrust and patent dispute, ending years of legal disputes between the world's top two chipmakers.

Shares of AMD jumped more than 23% on the news.

As part of the agreement, Intel will pay AMD a lump settlement of $1.25 billion. Intel said it will take the charge as a one-time item in the company’s fourth-quarter results. In exchange, AMD agreed to drop all outstanding litigation against Intel, including antitrust and patent cross license disputes. The companies will renew a five-year patent cross-licensing agreement.

“While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development," the two companies said in a joint statement.

The antitrust and anti-competitiveness practices that AMD alleged revolved around Intel's use of inducements and discounts to customers in order to make Intel's chips cheaper. Intel controls roughly 80% of the total chip market. 

"We are trying to reset the relationship between Intel and AMD," said AMD's CEO Dirk Meyer in a conference call. 

Intel executives said it was important for them to put these longstanding issues behind them. 

"The AMD case was massive and expected to become even bigger," said Intel's CEO Paul Otellini. "This case consisted of millions of pages of evidence and 2,200 hours of depositions. It would have been a long, expensive and complicated trial."

Intel also said that as a result of the settlement its fourth-quarter tax rate will come in closer to 20%, versus the 26% it had previously expected.

The settlement between AMD and Intel does not close Intel's current regulatory disputes with New York Attorney General Andrew Cuomo or the European Commission, both of which have filed lawsuits or begun investigations into Intel's business practices. However AMD said it would withdraw any complaint it had with Intel, possibly helping Intel settle those case successfully in the future.

In a statement, the New York Attorney General's office said it will continue their case. 

"The settlement is between two companies and we sued on behalf of New York state and the consumers of New York state. Our case will go on as if this didn't happen."

Otellini called Cuomo's case "completely without merit"  and said Intel will fight the charges.

Shares of Intel were off 9 cents at $19.75 at midday, while AMD shares were up $1.19 to $6.51.