Intel is maximizing its factories to build Xeon chips for data centers, at the expense of processors for entry-level laptops.
The hunger of AI giants such as Meta, Google, OpenAI, and Microsoft has first made RAM for PCs unaffordable. Then the price of flash memory skyrocketed, followed by hard drives. Now it appears that the availability of ordinary laptop processors will also suffer from the relentless AI hype.
Focus on Xeon
Intel itself announced this in a conversation with analysts about its fourth fiscal quarter. The company indicates that the demand for Xeon processors from data center specialists is significantly higher than expected. This is because Xeon chips are the beating heart of many AI systems. The majority of servers with Nvidia Hopper or Blackwell on board have an Intel Xeon CPU on board as a host.
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Nvidia does provide its own CPU in its Grace-Hopper and Vera-Blackwell systems, but the more classic architecture with an x86 CPU at its center remains very popular. So, no AI server without Xeon, and Intel understands this well.
Higher margins
After all, a Xeon chip brings in much more money than, say, an Intel Core 5 CPU for entry-level laptops, so Intel is maximizing its production capacity to manufacture Xeons for the data center.
The client segment is not completely forgotten in the process. Intel Core Ultra chips are still rolling off the production line, but here too, Intel is opting for the more premium chips that yield higher margins.
For the time being, the shift to Xeon production mainly impacts chips of the previous generation. The new Panther Lake CPUs, built on the Intel 18A manufacturing process, are currently exempt. After all, Intel does not yet have a significant supply of Xeon processors on the market that use Intel 18A. Clearwater Forest is an exception, but that Xeon chip is not designed for AI servers.
No more ‘normal’ laptops
The shift to Xeon is therefore mainly taking place for the Intel 3 and Intel 7 production lines. As a result, the impact will be most noticeable on the less exciting laptops. Anyone who wants a boring but solid entry-level system, with a banal Intel processor, a classic 16 GB RAM and a 256 GB SSD, is increasingly falling into a gap. None of these components are a priority for their respective manufacturers, which means that the supply is too low for the demand and the price is rising sharply.