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Let the first job know that you appreciate the opportunity but will have to decline the offer because you received another opportunity more in line with your goals at this time.
Be honest and open. You have an issue that is impacting the business and you need their help. Investment is about more than just money, also the people.
Echoing what M1 and C1 said - just be transparent with the first company about what happened and move forward as professionally as possible. At the end of the day you have to do what's best for you and everyone should understand that.
I was in this situation a while ago - just be honest. They will 100% understand that someone is likely going to pick a job over an internship so it's okay. As long as you're nice about it, the door will be open in case other opps pop up there
I agree with the others, be honest with the hiring manager/recruiter. Let them know you're grateful for the offer, but that another opportunity has just presented itself that you feel will be a better fit for you. At the end of the day, it's a business decision, nothing personal.