AI Frenzy Reaches CPUs! Intel and AMD Reportedly Ask Chinese Customers to Sign Long-Term Contracts to Secure Future Supply

According to sources, U.S. chip giants Intel (INTC-US) and AMD (AMD-US) are in talks with Chinese server customers to sign longer-term procurement contracts for data center processors, responding to continuously rising prices. This highlights how AI-driven demand has expanded beyond AI accelerators to memory, networking equipment, and server CPUs, giving suppliers greater leverage to request long-term purchase agreements.

AI data centers require not only GPUs from companies like NVIDIA (NVDA-US), but also large numbers of CPUs to support servers, storage systems, networking infrastructure, and AI inference workloads.

Insiders indicate that the agreements under discussion typically lock in procurement volumes but not prices, with most contracts lasting about one year. However, Intel and AMD have begun proposing two-year or even longer procurement commitments to select customers.

This trend mirrors the memory market, where buyers have recently shifted toward long-term supply contracts due to AI-driven supply tightness. It marks a significant shift in the server CPU market, as CPUs—historically more abundant than AI accelerators or memory—now also face supply constraints.

Tight CPU supply could increase costs for Chinese cloud service providers and internet companies expanding AI services, potentially slowing deployment.

One source noted that server CPU prices in China continue to rise, with some products seeing monthly increases exceeding 10%. Since the beginning of the year, certain CPU models have cumulatively increased in price by over 40%.

Reuters previously reported that Intel and AMD have informed Chinese customers of extended delivery times for server CPUs, with Intel’s wait times for some products reaching up to six months.

Market expectations suggest that CPU supply tightness will be a key topic when Intel reports earnings on Thursday. Intel CEO Lip-Bu Tan stated in April that supply continues to exceed demand, particularly for Xeon server CPUs. He also mentioned that Intel signed multiple multi-year supply agreements with customers like Google (GOOGL-US) in Q1.

AMD is scheduled to report earnings in early August and has recently raised its 2030 server CPU market size forecast to over $120 billion, citing strong demand for proxy AI workloads.