The AI infrastructure build-out is rewriting the rules of electronic component procurement, and few organisations are watching the shift more closely than Smith, the an independent distributor.
In a webinar hosted by Procurement Pro and sponsored by Smith, Managing Editor Paige Hookway sat down with Todd Burke, Chief Commercial Officer at Smith, and Todd Banker, Manager of Market Intelligence at Smith, to unpack how the AI-driven supercycle is reshaping sourcing strategy for data centres and beyond.
A market transformed in two years
Just two years ago, the picture looked very different. Banker explained that data centres were running at roughly 65-70% utilisation, commodity manufacturers were sitting on excess inventory, and prices on products like DRAM and NAND were at decade lows following the pull-forward in demand from pandemic-era stay-at-home policies.
That downturn has given way to what Burke called an outright “supercycle.” He pointed to industry revenue now forecast at roughly $1.5–1.6 trillion – nearly a 90% year-on-year increase – with memory alone accounting for around half of total semiconductor revenue, compared to a historical pace closer to 20-30%. As he put it, “AI infrastructure build out is absorbing the majority of the scarce wafers that are out there,” creating what he described as a two-tier market between companies that have secured supply and those still fighting for allocation.
Why buyers are turning to the open market
For procurement teams accustomed to direct manufacturer relationships, the open market can feel unfamiliar territory. Burke offered a simple distinction: direct and franchise channels come with contractual and geographic constraints, whereas independent distributors like Smith operate without formal agreements to any single manufacturer. Instead, Smith draws on “42 years of trading history, data, transactional information, and deep relationships” built across a global network of OEMs, ODMs, contract manufacturers, and other distributors.
Banker added useful historical context, noting the open market has existed since the 1970s and has matured considerably since then. Rather than being a last resort, he argued it now functions as a way of correcting imbalances in the supply chain: “We’re kind of instituting some equity back into the distribution, able to get product from places where it stagnated into companies that need the product.”
Capacity strain runs deeper than GPUs
While GPU shortages dominate headlines, Banker walked through how capacity constraints ripple across the entire component stack – from CPUs (where Intel’s node transition has pushed work to TSMC) to memory, where high-bandwidth memory is displacing conventional DDR5 production, to NAND, where hard drive and SSD manufacturers alike were caught underprepared for the scale of data centre expansion. Even raw materials are affected, with China’s export restrictions on rare minerals extending lead times further up the chain.
Burke reinforced the memory picture with figures from the major manufacturers: HBM output for 2026 is “basically sold out” at Samsung, SK Hynix, and Micron, with inventory at Korean manufacturers falling below 10 days. The knock-on effect, Banker noted, is being felt well outside the data centre – power management ICs and MLCCs are now under similar strain as AI-focused manufacturers deprioritise other customer segments.
Stockpiling: strategy or panic?
Asked whether the shift toward ‘strategic stockpiling’ and just-in-case procurement represents a genuine long-term change, both speakers leaned toward yes. Burke cited an automotive manufacturer that recently earmarked $4.5 billion for what he called “a strategic safety net,” framing the cost less as inefficiency and more as insurance: “It becomes an insurance policy for them that they’re willing to move on.” Banker drew a parallel to the aftermath of the 2022 shortage, when automakers began co-investing directly in manufacturer capacity expansion, predicting more hybrid arrangements of this kind will persist even once current pressures ease.
Tackling the trust problem
For teams new to the open market, quality and pricing remain the two biggest points of hesitation. Banker was candid about the market’s reputation problem, recalling the “1970s sleazy used car salespeople” image that once defined independent brokers, and pointed to the tens of millions of dollars companies like Smith have invested in quality control and ISO certification to change that perception. Burke echoed the point, stressing the value of due diligence: “Know who it is you’re dealing with … go visit, audit. If you can’t do a physical audit, do a virtual audit.”
On pricing, Burke was direct in rejecting the idea that open market rates should mirror direct pricing during a shortage: “The open market distributors, independents, don’t set the price … laws of economics, supply, and demand set the price.” He noted the same dynamic works in reverse during downturns, when independents can often source opportunistic savings unavailable through direct channels.
Engage early – and engage anyway
Both speakers were emphatic that procurement teams should not wait for a crisis to build relationships with the open market. “You can never be too early,” said Burke, pointing to Smith’s history of roughly two dozen shortages over 42 years, occurring on average every 18 months. Banker added that engagement doesn’t require a transaction: much of the value lies simply in market intelligence and early warning – “we’re kind of a canary in the coal mine for you.”
The session closed with live audience questions on counterfeit risk, negotiating leverage in a supplier-driven market, and regional sourcing diversification – reinforcing a consistent theme throughout: in a market this volatile, proactive engagement with a trusted open market partner is no longer optional, but foundational to supply chain resilience.
Watch the webinar on demand below:
