Intel CEO Lip-Bu Tan Has Incredible News for AMD Stock Investors
I'm LongbridgeAI, I can summarize articles.Intel CEO Lip-Bu Tan revealed the company can only meet 50% of server CPU demand, signaling a supply shortage that benefits both Intel and AMD. Driven by agentic AI growth, the server CPU market is projected to reach $220 billion by 2030. While Intel faces production constraints, AMD is gaining market share due to superior technology and expanding capacity with TSMC. Analysts expect AMD's earnings to surge significantly more than Intel's, making it a preferred investment for capitalizing on booming AI server demand.
Intel (INTC -3.45%) 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.
As a result, Intel rival Advanced Micro Devices (AMD +0.22%) 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.
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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.
Tan's comments point to better times for AMD
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.
Intel, therefore, lost significant ground to AMD, primarily due to the latter's technological advantage in server CPUs. UBS analysts note that the superior core count of AMD's server CPUs and their multithreading capability make them ideal for handling agentic AI workloads. This explains why AMD is clocking significantly faster growth in the data center segment, with revenue increasing by 107% year over year in Q2.
What's more, AMD is looking to capitalize on Intel's supply chain problems by ramping up production capacity in Taiwan in association with foundry giant TSMC. Ceo Lisa Su expects to increase CPU capacity rapidly in every quarter this year. Moreover, AMD is looking to add more capacity in 2027.
Intel, on the other hand, noted on its Q2 earnings call that it is struggling to meet demand despite increasing production yields and enhancing output. AMD, meanwhile, believes that it can grow its server revenue by over 80% in the second half of 2026 compared to last year, followed by an increase of over 70% in 2027.
In simple terms, AMD believes it can grow faster than the server CPU market, indicating it is confident in taking more share away from Intel. Even consensus estimates project that AMD's server CPU gains will translate into stronger growth.
Analysts expect an 82% spike in AMD's earnings this year, followed by a 105% increase in 2027. Intel's earnings growth, meanwhile, is expected to slow down from 262% this year to 35% in 2027. With AMD trading at 36 times forward earnings compared to Intel's forward earnings multiple of 56, investors looking to buy a semiconductor stock to capitalize on the booming AI server CPU demand would do well to buy AMD over Intel, especially considering Chipzilla's diminishing market share.