The Server Hardware Boom Is Reshaping AI Stocks Like Micron and Intel Far Faster Than Expected

The Acceleration Nobody Saw Coming

The demand for server infrastructure is outpacing even the most bullish predictions in the AI hardware sector. In December, Micron Technology (NASDAQ: MU) made a significant move by upgrading its 2025 server shipment forecast—jumping from a projected 10% growth to high teens percentage. What made this particularly striking wasn’t just the magnitude of the revision, but the timing: mid-year adjustments are common, but quarter-end revisions signal something extraordinary happening in real-time order flows.

Looking at the broader market, IDC’s projections paint an even more dramatic picture: global server spending is expected to surge 80% in 2025, followed by another 24.3% in 2026. This isn’t incremental growth—it’s a fundamental reshaping of infrastructure spending patterns driven by AI acceleration.

The beneficiaries are clear: companies controlling the critical hardware layers powering this expansion. Intel (NASDAQ: INTC) dominates data center CPUs, while Micron controls memory supply chains that feed both traditional servers and cutting-edge AI accelerators. Both are riding waves of unprecedented demand.

When Supply Becomes the Real Commodity

Memory chips operate in commodity markets where scarcity drives explosive pricing. Right now, that’s exactly the dynamic at play.

Manufacturers like Micron have been strategically redirecting production capacity toward high-bandwidth memory (HBM) chips—the specialized components that AI accelerators depend on. This reallocation sounds reasonable until you realize the collateral damage: standard DRAM chips, still absolutely critical for server infrastructure, are being squeezed out of production queues.

Micron CEO Sanjay Mehrotra was blunt about the constraint during recent earnings: the company can only fulfill 50% to two-thirds of demand from major customers in the medium term. This isn’t a temporary hiccup—it’s a structural limitation.

Even with aggressive capital spending increases announced for 2026, meaningful supply expansion won’t arrive quickly. The timeline tells the story: Idaho’s first new memory fab won’t produce wafers until mid-2027, with a second facility coming online in 2028. New York’s planned factory won’t contribute until 2030.

The math is simple: 2026 will see continued supply constraints, persistent pricing power, and margin expansion for producers. Micron’s Q1 fiscal 2026 results already signaled this trajectory—revenue jumped 57% year-over-year while net income nearly tripled. As long as supply remains capped and demand stays elevated, pricing should hold firm.

The CPU Recovery Nobody Expected

The AI boom initially cannibalized demand for server CPUs as capital flowed toward GPUs and AI accelerators. For Intel, this created a compounding problem: market share erosion to AMD coincided with decreased CPU refresh cycles across data centers.

But the narrative has shifted. At the Barclays Global Technology Conference, Intel reported an unexpected turnaround—server CPU demand is surprisingly resilient and growing.

Three factors explain this reversal:

First, hyperscalers are executing overdue server refreshes. They’re replacing aging, power-hungry CPUs with newer, efficient models. Since AI workloads are energy-intensive, modern CPUs measurably reduce total cost of ownership—making upgrades economically defensible.

Second, CPUs maintain an underappreciated role in specific AI applications. Retrieval-augmented generation (RAG) pipelines, which connect large language models to external data for improved outputs, benefit from CPU-accelerated components. Intel’s latest server CPUs feature integrated AI processing capabilities that handle RAG pipeline functions efficiently.

Third, the sheer scale of infrastructure buildouts means even GPU-centric data centers require substantial numbers of supporting CPUs.

Intel has already been shifting manufacturing capacity from consumer CPUs toward data center CPUs. The constraint remains acute heading into early 2026, but Intel’s process roadmap provides relief: current-generation server CPUs use Intel 3 process technology, while next-generation chips launching in 2026 will move to Intel 18A. As new processes scale, manufacturing capacity will expand proportionally.

The data center and AI segment showed softness in Q3, but a recovery is taking shape as Intel prioritizes server CPU production to capture surging demand.

Two Different Plays on the Same Boom

Micron and Intel represent distinct leverage points on the server infrastructure explosion. Micron benefits from supply-constrained memory markets where pricing power extends through 2026. Intel profits from renewed CPU demand and process technology scaling that unlocks capacity.

Neither stock appears overvalued given the structural tailwinds, though execution risks exist for both. The server boom is fundamentally reshaping which AI stocks command investor attention, and these two hardware giants are positioned at the epicenter of that transition. Whether this acceleration continues or moderates depends on how quickly the AI infrastructure buildout progresses—but for now, the momentum remains decidedly upward.