Higher prices can't crimp server sales as AI drives demand

While memory costs have impacted PC sales, server demand is on the rise due to AI infrastructure spending expanding beyond major tech firms to include corporate and governmental buyers. The second quarter was a record-breaking one for the server sector, with vendor revenue hitting an all-time high of $166.3 billion, a 52 percent jump compared to the same period last year.

This contrasts with the laptop and desktop market, where unit shipments have declined as buyers are deterred by higher prices, largely due to memory component shortages.

Even with higher prices, large vendors have managed to maintain their revenue. Server shipments rose by 15.4 percent year-on-year in Q2, despite average selling prices being inflated by increased memory pricing and ongoing supply issues with other components. On average, GPU-accelerated servers saw a 44 percent spike in prices to $170,200, even as their unit shipments dropped by 10.8 percent year-on-year. Non-accelerated systems experienced a 33 percent increase in prices to nearly $13,000.

The primary driver of demand remains AI infrastructure investment from hyperscalers and large cloud providers, according to IDC. GPU-accelerated servers for AI purposes accounted for nearly 53 percent of total revenue during Q2. However, IDC also notes that AI server adoption is expanding beyond the largest players, reaching enterprise and government sectors in numerous countries.

This layer of demand is less influenced by short-term commercial budget cycles. Kuba Stolarski, IDC research vice president for Computing Platforms and Service Provider Infrastructure, emphasized the broadening demand scope.

In Q2, non-x86 servers now account for 44.8 percent of server market revenue, up from 44.7 percent in the first quarter, despite the revenue figure increasing from $58.7 billion to $74.4 billion. Additionally, IDC observes that big brands are encroaching on the market share of original design manufacturers (ODMs), the so-called white box server makers catering to hyperscalers.

While ODMs still hold the majority of revenue, their share decreased from over 60 percent last year to 53.9 percent in Q2. Leading the pack are Dell Technologies, with a 13.4 percent share, followed by Supermicro at 6.1 percent, Lenovo at 5.1 percent, and HPE at 3.5 percent. The United States remains the largest server market, contributing $112.2 billion or 67.4 percent of global revenue in Q2.

China generated $26.4 billion, while Asia-Pacific excluding China and Japan reached $10.9 billion, and Western Europe contributed $9.1 billion.