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News reports say Nvidia's new Grace (named for Grace Hopper) chip will compete with Intel's cpus.

Will only compete with Intel in a small way. There was no indication that Nvidia will sell these other than in complete systems that they make that include GPUs (like the DGX series) and they don't ship until 2023.

Intel responded by announcing they will look into production of chips that are in short supply causing the auto industry to close assembly plants and trim production. These are reportedly old design chips made on obsolete equipment. Will Intel restart old equipment to make them? Or redesign the chips to fit their existing lines?

Did Intel announce this in response? I thought they announced this weeks ago.
In any case, a foundry takes the designs from a customer and manufactures them. This is what TSMC does, for example. I don't think "redesigning" them is normally part of the deal. That would mean exposing your chip IP to the engineers at Intel.

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