Intel (INTC.US) regains pricing power: Shortage of CPU supply has triggered price increases across the board. Wall Street says “make one by one and sell one by one”

The Zhitong Finance App learned that Intel (INTC.US) is currently facing not loss of customers, but that chip supply is in short supply. The semiconductor giant has spent the past year making every effort to repair its central processor (CPU) reputation in the PC and data center server core components market. However, this recovery story has now encountered a new bottleneck: production capacity cannot keep up with orders, and shortages are beginning to be reflected on the price side. According to media sources, Intel raised the official pricing of Xeon (Xeon) server chips and Core Ultra (Core Ultra) notebook chips on the eve of the third quarter. Wall Street believes that the company has the ambition to continue to raise prices without losing customers.

Wedbush: Shortage of server CPUs creates room for Intel to raise prices

Matt Bryson (Matt Bryson), an analyst at Wedbush Securities, pointed out in a customer report that the continued shortage of server CPUs has given Intel the flexibility to raise prices without harming demand.

He said that the key issue at present is not whether Intel can raise prices, but rather where does the price increase fall — whether the official price increases in sync with the actual purchase price of the OEM manufacturer, or whether it is mainly adjusting prices on the retail side and distribution channels.

Since server chips account for a larger share of Intel's business, this round of price increases will significantly drive profit growth. If price increases are generally implemented, it means that Intel has regained pricing power for the first time in many years, reflecting a tight supply pattern.

CFO: Server CPU revenue growth mainly depends on average price increases

At the Bank of America Global Technology Conference on June 2, Chief Financial Officer David Zinsner (David Zinsner) revealed that the company's server CPU revenue increased by about 20% to 25% year-on-year in the last quarter. The main driving force was the rise in average selling price (ASP) rather than the increase in shipment volume.

He explained that as the number of single-chip cores increased, the price naturally increased; what is more noteworthy is that Intel also achieved a price recovery under the same single-core caliber, and this indicator continued to decline for many years. Zinsner also said that the company is securing long-term agreements with customers to fix prices and purchase volumes, thereby increasing the visibility of production capacity planning.

He added that current demand is sufficient to support growth this year, next year, and the year after, and that the current constraint is supply rather than customer wishes — in his words, “if you make a CPU today, you can probably sell it.”

AI restructuring demand structure: reversal of CPU/GPU ratio

Demand itself is being profoundly reshaped by artificial intelligence. Intel CEO Lip-Bu Tan (Lip-Bu Tan) revealed at the J.P. Morgan technical conference on May 19 that the ratio of CPU and GPU in AI systems has changed dramatically.

Workloads in the training era are highly dependent on GPUs, usually 1 CPU with 8 GPUs; in agent-based AI (Agentic AI) scenarios — software agents independently plan, call tools, and complete multi-step tasks — the customer feedback ratio is close to 1:1, and in some cases it has even reached 4 CPUs with 1 GPU.

In his keynote speech at the Taipei International Computer Show (Computex) on June 2, company vice president Kevork Kechichian (Kevork Kechichian) demonstrated the comparison between traditional AI reasoning and proxy AI workflows: traditional GPUs account for close to 7:1, while proxy AI is CPU-dominated, as agents frequently perform tasks that CPUs are good at, such as data acquisition, code execution, and rule verification.

Stock price targets and long-term outlook

For Intel shareholders, the combination of “price increases+supply constraints” is far superior to the pattern of “price reduction and conservation” eroding profits in previous years. Zinsner said that the company has advanced the yield rate of the 18A advanced process by at least one quarter, which will help speed up chip production and ease current production capacity bottlenecks.

Additionally, Intel has set a long-term financial goal, internally known as the “45 Rule,” that is, revenue growth and operating profit margin combined to exceed 45%. Zinsner called this a multi-year goal. Although not achievable in the short term, cost optimization, stable pricing, and rising demand all point in the right direction.

Of course, once additional production capacity is released, there are still variables as to whether the pricing power can be maintained. But at least for now, the chip giant, which has been struggling to tell Wall Street a good story of growth for many years, has a simpler and more powerful story: demand outperforms supply, and customers would rather raise prices rather than leave the market.

Of the 46 analysts covering Intel stock, 11 suggested a “strong buy,” 1 suggested a “buy,” 32 suggested a “neutral,” and 2 suggested a “strong sell.” The average price target is $102.87, which is lower than the current stock price of $112.