U.S. semiconductor leaders Intel and Advanced Micro Devices are reportedly entering into long-term purchasing agreements with server customers in China for data center processors, according to two sources familiar with the negotiations. These commitments come as demand has driven up the price of computing components.
The Impact of the AI Sector Boom
The agreements highlight a broader shift resulting from the artificial intelligence (AI) boom. Demand is no longer confined solely to specialized AI accelerators, such as those developed by Nvidia. Instead, the requirement for large-scale data centers necessitates significant quantities of components including memory, networking equipment, and general-purpose server processors (CPUs). This widespread demand has granted suppliers like Intel and AMD greater leverage in securing multi-year purchase deals.
The negotiations under discussion are generally structured to guarantee specific purchase volumes rather than fixing prices. While most agreements are expected to cover approximately one year’s supply, some customers have reportedly discussed commitments extending two years or even longer. These trends mirror the recent memory-chip market, where AI-driven scarcity has prompted buyers to seek extended supply commitments.
Server CPU Market Dynamics in China
These developments represent a notable shift for server CPUs, which have historically been easier to acquire than either AI accelerators or memory chips. However, tighter supplies of CPUs could potentially increase costs and slow down the deployment of AI services for Chinese internet and cloud providers. In China, server CPU prices continue to climb, with some products recording month-on-month increases exceeding 10%. Furthermore, the cost of certain CPU products has risen by more than 40% in China since the beginning of the year.
Previously, Reuters reported earlier this year that Intel and AMD had notified Chinese clients of extended wait times for server CPUs, with Intel lead times reaching up to six months for certain products. The reports confirm that China remains one of the world’s most substantial server markets, fueled by the rapid construction of AI computing clusters, national computing infrastructure, and data center racks. While this buildout intensifies competition for Intel and AMD processors, Chinese buyers are simultaneously navigating U.S. restrictions concerning access to the most advanced AI GPUs.
Industry Forecasts and Corporate Outlook
During a presentation in April, Intel CEO Lip-Bu Tan told analysts that demand “continues to run ahead of supply,” particularly for Xeon server CPUs. He also mentioned securing a multi-year contract with Google as one of several long-term arrangements signed by Intel during the first quarter.
AMD, which is scheduled to report results in early August, has already projected its server CPU market forecast to exceed $120 billion by 2030, citing robust demand connected to agentic AI workloads. The sources involved in the reporting declined to give their names and noted that neither Intel nor AMD responded to requests for comment.
