Intel is accelerating and expanding its advanced packaging capacity in New Mexico and Malaysia to support AI workloads and data center requirements, signaling a strategic shift toward data center processors over consumer CPUs.

The move reflects a broader prioritization of manufacturing and packaging investments to meet supply shortages and the rapid AI-driven growth in data center demand, including reallocating production from consumer PCs to data center CPUs.

Supply constraints are expected to persist into the first half of 2027, even as data center growth continues and potential improvements could emerge in the second half of 2027 and beyond.

Intel projects capital expenditure around $20 billion in 2026, with a notable rise anticipated in 2027, as capex escalations and equipment orders rose about 40% sequentially in the latest quarter.

Yields and cycle times are improving, with Intel 3 manufacturing costs down roughly 15% since the start of 2026.

Granite Rapids Xeon processors (Intel 3) are being accelerated, and Fab 24 in Ireland is being expanded to boost capacity for online readiness by late 2027, if timelines hold.

Oregon resources earmarked for Intel 18A Panther Lake client chips are being redirected to Intel 3 data center production, slated to begin in the second half of 2027.

Fab 52 in Arizona is ramping Intel 18A production and expanding into Fab 62 to create a second high-volume site for 18A and derivatives, though the split between client and server allocations remains undisclosed.

Data Center and AI revenue rose to $7.3 billion in the third quarter, up 17% from the prior quarter and about 80% year over year, underscoring a supply crunch driven by unprecedented AI demand.

Weaker PC demand is allowing Intel to prioritize server wafers without abandoning consumer volume, with aims to gain share via the Core Ultra 400-series “Nova Lake” CPUs.

Intel expects data center CPU demand to stay strong through 2027 and 2028 as AI workloads expand, even amid ongoing supply challenges.

The shift toward data center and enterprise AI comes as the consumer PC market declines, with enterprise demand helping offset client-side softness.