AI PCs Set to Take Off in One Year? Here's What You Need to Know

Analysts Notebook joined discussion · May 31, 2024 15:17

Industry leaders remain optimistic about AI PCs. Acer chairman Jason Chen likens their potential impact to the internet boom of the late 1990s, while Wistron president Jeff Lin believes AI PCs will gradually gain traction. $HP Inc (HPQ.US)$ shares surged after reporting second-quarter earnings, driven by growth in PC sales. The company expects to benefit from the AI era, having announced AI-powered PCs. CEO Enrique Lores indicated modest consumer adoption of AI PCs in late 2024, with significant growth anticipated over the next three years.

We continue to think HPQ remains well positioned to benefit from the PC upcycle, which should only accelerate in the second half and in FY25. While Print remains a drag, and Print EBIT margins are expected to be flat to down quarter over quarter in Q3, this should be somewhat offset by cost savings actions, sequential hardware growth in Q4, and upside from personal systems," said Evercore ISI analyst Amit Daryanani in a client note.

What Is 'AI PC'?

Manufacturers claim AI PCs process data faster and handle more AI tasks directly on the device, reducing reliance on cloud data centers. AI PCs feature specialized processors called neural processing units (NPUs) that manage most on-device AI tasks. NPUs work alongside central processing units and graphics processors to handle complex tasks, enhance processing speeds, and power applications like AI assistants. Some models can even train AI models, a task usually done on servers. PC makers hope these features will attract buyers as generative AI becomes more common.

Brands like $Dell Technologies (DELL.US)$, HP, Samsung, Lenovo, Asus, and Acer have introduced new computers under $Microsoft (MSFT.US)$'s recently announced Copilot+ branding. Microsoft's Surface Laptop and Surface Pro tablet are among the most affordable options, starting at $999. The Lenovo ThinkPad T14s Gen 6 is the most expensive, with prices starting at $1,699.

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AI PCs Set to Take Off in One Year? Here's What You Need to Know

AI PCs' Outlook

Research firm Canalys predicts AI PC shipments will exceed 100 million by 2025, making up 40% of all PCs shipped. HP CEO Enrique Lores said that the upgrade cycle fueled stronger-than-expected PC demand by businesses.

The installed base has aged, and now people, both small companies and large companies, realize that they need to change that," Lores explained.

By the end of 2026, 100 per cent of enterprise PC purchases will be Artificial Intelligence PCs globally, up from less than 5 per cent in 2023, said a Gartner report. And by the end of 2024, Gartner forecasts AI PC shipments will reach 22 per cent.

Organisations who understand how they can extract the most from AI-powered laptops will use them in productivity tools and will automate a lot of work. AI PCs will reduce a lot of their efforts in areas like researching, pre-sales, marketing, and other such functions," said Faisal Kawoosa, chief analyst and founder, TechArc—a technology consulting firm.

The demand is reflected in the demand for AI chips, where revenue from AI semiconductors globally is expected to total $71 billion in 2024, an increase of 33 per cent from 2023, according to the latest forecast from Gartner.