Harsh Chauhan, The Motley Fool
5 min read
Intel (NASDAQ:INTC) is firmly in the artificial intelligence (AI) chip race, driven by improving demand for server central processing units (CPUs), which has been fueled by growth in agentic AI and inference workloads.
Inference and agentic AI are multi-step tasks, unlike chatbots that gained popularity in the first wave of AI deployment. Instead of simply answering a prompt, AI agents break down a query into multiple steps to perform tasks autonomously. This brings CPUs into focus, as they can manage multi-step tasks, call applications into action, and monitor the security of autonomous tasks performed by the agent.
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As a result, Intel rival Advanced Micro Devices (NASDAQ:AMD) expects the total addressable market (TAM) for server CPUs to increase at a compound annual growth rate of more than 50% through 2030. AMD expects this market to generate $220 billion in revenue in 2030. So, Intel CEO Lip-Bu Tan’s remarks about the state of the server CPU market clearly suggest that better times lie ahead for these chipmakers.
Image source: Intel
Intel is finding it difficult to meet server CPU demand
Tan recently remarked at a conference that it can meet only 50% of customer demand for CPUs. This is good news for Intel and AMD, as both companies are dominant players in the x86 server CPU space. The shortage of CPUs should ideally lead to higher prices, lifting the margins and earnings of Intel and AMD.
Tom’s Hardware reports that Intel is poised to implement a 10% price hike in March 2027. It is worth noting that the company has already implemented a couple of price hikes this year. Even AMD is expected to follow suit, according to the report. So, the impressive turnaround in Intel’s fortunes is likely to continue.
The company’s revenue in Q2 increased 25% year over year to $16.1 billion, fueled by a 59% jump in the data center and AI (DCAI) segment. What’s more, Intel posted non-GAAP earnings per share of $0.42 from a loss of $0.10 in the year-ago quarter. As server CPU demand increases and supply constraints push up prices, the company should ideally be able to sustain its healthy growth momentum.
AMD could be a bigger beneficiary of the booming demand for server CPUs. That’s because it has consistently taken market share from Intel in the x86 server CPU market. Mercury Research reports that AMD’s server CPU market share increased to 34.5% in Q2 this year, up from 27.3% in the year-ago period.
