Prices Rise as Demand Surges
The supply constraints have pushed up prices for Intel’s server CPUs in China by more than 10% on average, though the exact increase varies depending on customer contracts, one source said. This price surge reflects a broader trend: AI-driven demand is not only squeezing AI-specific chips but also affecting other essential components, including memory chips, whose prices have continued to rise sharply.
The recent notices to customers—reported in the last few weeks—suggest that CPU shortages have intensified at a time when companies across China are accelerating AI deployments. This creates a growing challenge not only for AI startups but also for major cloud service providers and traditional manufacturers that rely on server upgrades.
Backlogs and Rationing of Intel Xeon CPUs
China accounts for more than 20% of Intel’s global revenue, making it a critical market for the company. Yet Intel’s fourth- and fifth-generation Xeon CPUs are reportedly in particularly short supply. Two sources said Intel has been rationing deliveries and faces a significant backlog of unfulfilled orders for these models. Delivery lead times have stretched to as long as six months.
AMD, too, has alerted customers to supply constraints. One source and a third party said AMD has pushed out delivery lead times for some products to between eight and ten weeks.
Companies Respond, But Shortages Persist
Intel acknowledged the tight supply situation in a statement to Reuters, noting that the rapid adoption of AI has driven strong demand for “traditional compute.” The company said it expects inventory levels to be at their lowest in the first quarter but anticipates supply improvement from the second quarter through 2026.
AMD also highlighted its efforts to expand capacity. In a statement, the company said it has increased supply capabilities to meet demand, pointing to strong supplier agreements and its partnership with Taiwan Semiconductor Manufacturing Company (TSMC).
Two Companies Dominate the Market
Intel and AMD together hold the lion’s share of the global server CPU market. Intel’s market share has fallen from over 90% in 2019 to roughly 60% in 2025, while AMD’s share has risen from around 5% to more than 20% over the same period, according to a UBS report.
In China, major customers include leading cloud and server providers such as Alibaba and Tencent, which are driving much of the demand for high-performance compute capacity.
Why Shortages Are Worsening
Several factors are contributing to the supply crunch:
- Intel production challenges: Intel has faced ongoing manufacturing yield issues, limiting its ability to scale output quickly.
- TSMC capacity constraints: AMD relies on TSMC, which has prioritized AI chip production, leaving less capacity available for CPUs.
- Memory chip shortages: Rising memory prices in China last year led customers to accelerate CPU purchases in order to secure memory supply and pricing.
- Rising demand for agentic AI: More advanced AI applications—those capable of multi-step, autonomous decision-making—require significantly more CPU power than traditional workloads, increasing pressure on server CPU inventories.
As AI adoption accelerates, these shortages could continue to ripple through the technology supply chain, affecting pricing, deployment timelines, and the pace of cloud expansion across China.