Intel and AMD Sign Long-Term Server CPU Deals with Chinese Clients as Prices Surge

US chipmaking giants Intel (INTC) and Advanced Micro Devices (AMD) are signing longer-term purchase commitments with Chinese server customers for data-centre processors as prices surge, two people familiar with the talks said.

The move highlights a broader consequence of the AI boom: demand has spread beyond AI accelerators to memory, networking gear, and server processors, giving suppliers greater leverage to seek long-term purchase deals. AI data centres require not only Nvidia-style graphics processors but also large numbers of central processing units to support servers, storage, networking, and inference workloads.

Deal Structure and Market Context

The agreements under discussion typically lock in purchase volumes but not prices, the people said. Most cover approximately one year of supply, although Intel and AMD have discussed commitments of two years or longer from some customers. The shift echoes trends in the memory-chip market, where the AI-driven shortage has pushed buyers toward longer-term supply commitments.

The sources declined to be identified as they were not authorised to speak to the media. Intel and AMD did not respond to requests for comment.

Supply Tightness and Price Increases

The talks mark a shift for server CPUs, which have been easier to obtain than AI accelerators or memory chips. Tighter CPU supply could raise costs and slow deployment for Chinese cloud providers and internet companies expanding AI services.

Server CPU prices are still climbing in China, with month-on-month increases topping 10% for some products, one of the sources said. Prices of some CPU products have risen more than 40% in China since the start of the year, the source added. Reuters reported earlier this year that Intel and AMD had notified Chinese customers of lengthy waits for server CPUs, with Intel lead times reaching as long as six months for some products.

Company Outlooks

The CPU shortage will be among the key topics likely to be addressed on Thursday when Intel reports its quarterly results. CEO Lip-Bu Tan told analysts in April that demand "continues to run ahead of supply," especially for Xeon server CPUs. He also cited a multi-year deal with Google (GOOGL) as one of several long-term contracts Intel signed in the first quarter.

AMD, due to report in early August, already raised its server CPU market forecast to more than $120 billion by 2030, citing strong demand related to agentic AI workloads.

China's Server Market

China is one of the world's largest server markets, fuelled by rapid construction of data centre racks, AI computing clusters, and national computing infrastructure. The build-out has intensified competition for Intel and AMD processors, even as Chinese buyers face separate US restrictions on access to the most advanced AI GPUs.

Market Sentiment: 

The sentiment is positive for Intel and AMD, reflecting the broadening of AI-driven demand beyond GPUs into the server CPU market. The shift toward longer-term purchase commitments signals that customers are securing supply in a tightening market, providing revenue visibility and pricing power for chipmakers. The 40% price increases in China since the start of the year underscore the severity of the supply-demand imbalance. Intel's Xeon and AMD's EPYC server CPUs are benefitting from the AI infrastructure build-out, and the long-term contracts reduce earnings volatility.

For Intel, this is a positive development as it works to stabilise its core business. For AMD, the raised server CPU market forecast to $120 billion by 2030 reflects confidence in the secular AI demand trend. China's position as a major server market, despite US export controls on advanced GPUs, ensures sustained demand for CPUs. Lead times of up to six months indicate tight supply, and further price increases could boost margins.

However, geopolitical risks persist: US-China tensions and export controls could disrupt supply chains or demand. The agreements that lock in volumes but not prices give buyers some protection but leave suppliers with pricing flexibility. The next catalysts are Intel's quarterly results and AMD's earnings, which will provide updates on the demand outlook. Any slowdown in AI capex would be a risk, but the current demand environment remains robust.

The long-term trend is clear: AI data centres need CPUs, and the supply crunch is creating favourable conditions for Intel and AMD. The Chinese market, despite geopolitical tensions, remains a key growth driver. The sentiment is bullish for the server CPU segment, with Intel and AMD as primary beneficiaries. The next few quarters will test the durability of the demand surge, but the current outlook is positive. The market is recognising that CPUs are essential to the AI infrastructure stack, and the long-term deals are a validation of their strategic importance. The tightening supply and price increases are a testament to the importance of CPUs in the AI hardware ecosystem. The market is optimistic about Intel's and AMD's prospects in this environment, and the next earnings reports will provide further clarity. The CPU shortage is a key theme in the AI hardware ecosystem, and the market is watching closely.

Disclaimer:
This content has been generated using AI technology and is intended for informational purposes only. While efforts have been made to ensure accuracy and relevance, this text should not be considered professional advice or an official statement. Always verify information from authoritative sources before making any decisions. This is not financial advice.