Intel shifts PC chip production to server CPUs as AI demand drives shortage

Intel is shifting manufacturing capacity from consumer processors to server CPUs due to surging AI demand, creating what CEO Lip-Bu Tan calls one of the most significant supply shortages in history. The company prioritizes Xeon 6 production, expecting severe shortages through the first half of 2027. Intel's Data Center and AI division generated $7.3 billion in revenue in Q3 2026, up 17% sequentially and nearly 80% year over year. The company is expanding Fab 24 in Ireland and Fab 62 in Arizona, while converting Oregon resources from 18A PC production to Intel 3 data center chips. Intel also faces advanced packaging material shortages, particularly substrates, with 40% more capacity expected by late 2027. The company plans about $20 billion in capital expenditures for 2026, with relief anticipated in the second half of 2027.