NVIDIA's supply of AI chips remains tight due to insufficient advanced packaging production capacity from key partner TSMC. As per the UDN report, NVIDIA will add Intel as a provider of advanced packaging services to help ease the constraints. Intel is expected to start supplying NVIDIA with a monthly advanced packaging capacity of about 5,000 units in Q2 at the earliest. While TSMC will remain NVIDIA's primary packaging partner, Intel's participation significantly boosts NVIDIA's total production capacity by nearly 10%. Even after Intel comes online, TSMC will still account for the lion's share—about 90% of NVIDIA's advanced packaging needs. TSMC is also aggressively expanding capacity, with monthly production expected to reach nearly 50,000 units in Q1, a 25% increase over December 2023. Intel has advanced packaging facilities in the U.S. and is expanding its capacity in Penang. The company has an open model, allowing customers to leverage its packaging solutions separately.

The AI chip shortages stemmed from insufficient advanced packaging capacity, tight HBM3 memory supply, and overordering by some cloud providers. These constraints are now easing faster than anticipated. The additional supply will benefit AI server providers like Quanta, Inventec and GIGABYTE. Quanta stated that the demand for AI servers remains robust, with the main limitation being chip supply. Both Inventec and GIGABYTE expect strong AI server shipment growth this year as supply issues resolve. The ramping capacity from TSMC and Intel in advanced packaging and improvements upstream suggest the AI supply crunch may be loosening. This would allow cloud service providers to continue the rapid deployment of AI workloads.