Intel and AMD Securing Long-Term CPU Deals in China Amid AI-Driven Price Surge, Sources Say

Intel and Advanced Micro Devices are negotiating longer-term purchase agreements with their Chinese server clients for data-center central processing units (CPUs), according to two people familiar with the discussions. The move comes as a supply crunch, driven by the artificial intelligence boom, causes processor prices to surge.

A Shift in Purchasing Strategy

The AI-driven expansion of data centers has tightened the supply of components beyond just high-end graphics processors (GPUs), giving suppliers like Intel and AMD greater leverage. AI infrastructure requires vast numbers of CPUs to manage servers, storage, and networking, leading to a scramble for supply.

According to the sources, who requested anonymity as they were not authorized to speak to the media, the new deals under discussion primarily lock in purchase volumes rather than fixed prices.

• Most agreements cover a supply period of approximately one year.
• Some customers have reportedly discussed commitments of two years or longer.

This trend mirrors a similar shift in the memory-chip market, where buyers are also moving toward longer-term contracts to secure supply.

Soaring Prices and Supply Constraints

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The increased demand has led to significant price inflation in China's server CPU market. One source reported that prices for some CPU products have climbed by more than 40% since the beginning of the year, with certain month-on-month increases exceeding 10%.

This situation marks a notable change for server CPUs, which had previously been more readily available than specialized AI accelerators. Reuters reported earlier this year that both Intel and AMD had informed Chinese customers of significant delays, with lead times for some Intel products extending to as long as six months. The tight supply could increase costs and slow the deployment of AI services for China's cloud and internet companies.

Market Context and Outlook

The supply shortage is a key topic for the industry. In April, Intel's CEO stated that demand, particularly for its Xeon server CPUs, "continues to run ahead of supply." The company also noted it signed several long-term contracts in the first quarter, including a multi-year deal with Google.

AMD, which is scheduled to report earnings in early August, has raised its forecast for the server CPU market, projecting it to exceed $120 billion by 2030. This robust outlook is fueled by strong demand linked to emerging AI workloads, even as Chinese firms face U.S. restrictions on accessing the most advanced AI GPUs.