**AI Boom Drives Intel and AMD to Secure Long-Term Server Chip Contracts**
In a significant development within the tech industry, major U.S. chip manufacturers Intel and Advanced Micro Devices (AMD) are entering into long-term purchase agreements with Chinese server customers for data-center processors. This move comes amid a surge in prices and reflects the broader impact of the artificial intelligence (AI) boom, which has expanded demand for various computing components beyond just AI accelerators.
According to sources familiar with the ongoing negotiations, these long-term contracts are primarily focused on securing supply commitments for central processing units (CPUs) that are essential for server operations, storage, networking, and inference workloads. The agreements typically involve locking in purchase volumes, although they do not fix prices. Most of these contracts are expected to cover supply for approximately one year, with discussions for some customers extending to commitments of two years or more.
The current market dynamics highlight a shift in the availability of server CPUs, which have historically been easier to procure compared to AI accelerators or memory chips. However, as the demand for AI-related infrastructure grows, the supply of CPUs is tightening, leading to increased costs and potential delays for Chinese cloud providers and internet companies that are expanding their AI services.
Reports indicate that server CPU prices in China are on the rise, with some products experiencing month-on-month price increases exceeding 10%. Since the beginning of the year, certain CPU products have seen price hikes of more than 40%. This inflation in costs is compounded by reports from earlier this year that Intel and AMD had informed Chinese customers about extended lead times for server CPUs, with Intel's wait times reportedly reaching up to six months for specific products.
The current CPU shortage is expected to be a focal point during Intel's upcoming quarterly results announcement. CEO Lip-Bu Tan previously noted that demand for Xeon server CPUs is outpacing supply, and he highlighted a multi-year agreement with Google as part of Intel's strategy to secure long-term contracts.
AMD, which is set to release its financial results in early August, has also adjusted its market forecast for server CPUs, projecting it will exceed $120 billion by 2030. This adjustment is largely attributed to the strong demand driven by AI workloads.
China represents one of the largest server markets globally, spurred by rapid development in data center infrastructure, AI computing clusters, and national computing initiatives. This growth has intensified competition for processors from Intel and AMD, especially as Chinese buyers navigate separate U.S. restrictions that limit access to the most advanced AI GPUs.
As the AI boom continues to reshape the landscape of technology, the strategic moves by Intel and AMD to secure long-term contracts with Chinese customers underscore the increasing importance of stable supply chains and the need for companies to adapt to the evolving demands of the market.