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Intel (INTC) is running short on chips, not customers.
The semiconductor giant has spent the last year rebuilding its reputation with buyers of central processing units, the chips that act as the brain of a personal computer or a data center server.
Now the comeback story has run into a new problem: it cannot produce enough chips to keep up with orders, and the shortage is starting to show up in prices.
Media reports indicate that Intel raised list prices on its Xeon server chips and Core Ultra laptop chips heading into the third quarter, and Wall Street thinks the company can keep raising prices without scaring away buyers.
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Sign up now! Wedbush Securities analyst Matt Bryson told clients that ongoing shortages of server CPUs give Intel room to raise prices without hurting demand.
He noted the real question is not whether Intel can raise prices, but where those increases are landing, whether official list prices are moving in step with what computer makers pay, or whether Intel is mainly adjusting smaller retail and distribution prices, according toSeeking Alpha.
The price hike in server chips should drive higher earnings growth for Intel, given that server chips account for a much larger share of its business.
If the increases are showing up broadly, it suggests Intel has pricing power for the first time in years, a sign that supply is tight.
At the Bank of America Global Technology Conference on June 2, Chief Financial Officer David Zinsner said the company's server CPU revenue grew in the 20% to 25% range last quarter, driven primarily by average selling price increases rather than unit growth.
He explained that as core counts per chip increase, prices naturally rise too.
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