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Microsoft (NASDAQ:MSFT) introduced its AI-ready PCs last Monday, ushering in a new era, and likely sparking a commercial PC refresh, according to an in-depth report by Morgan Stanley.
“We believe that the commercial PC market will be the initial adopters of AI PCs given they are primarily being marketed as productivity tools,” reads the report named “AI PCs to usher in the next leg of PC market growth.”
The initial price of $1,000 or more, along with a commercial PC installed base that is 13% larger than pre-COVID, and due for a refresh ahead of Windows 10 end-of-life in October 2025, also serve as key factors accelerating market growth during the second half of 2024 and 2025.
A survey found 75% of chief information officers in the US and Europe are evaluating or planning to evaluate AI PCs.
Morgan Stanley’s initial AI PC forecast expects the new computers to comprise 2% of the total PC market in 2024 before climbing in the years ahead. It is expected to reach 16% in 2025, 28% in 2026, 48% in 2027 and 64% by 2028.
The PC market as a whole slowed considerably the last few years, falling from 343M units shipped in 2021 to 284M in 2022 and down to 247M in 2023. And although consumer PC demand remains down, commercial demand started to pick up during the first quarter of 2024, indicating a potential refresh.
Interestingly, the proliferation of AI PCs will lower the percentage of AI workloads in the cloud over the next three years as more workloads are conducted through a hybrid environment, according to the CIO survey.
The reason being that with on-device inferencing, AI PCs “deliver a lower cost per query, lower latency, unlimited personalization, better availability, and greater privacy and security.”
Dell CEO Michael Dell recently said AI inferencing can be 75% more cost-effective on-premise versus in the cloud, and that 83% of enterprise CIOs expect to repatriate workloads from the public cloud this year for AI.
The chips for Copilot Plus PCs are being developed by Qualcomm (NASDAQ:QCOM), AMD (NASDAQ:AMD) and Intel (NASDAQ:INTC). Microsoft expects to sell 50M AI PCs across different manufactures by the end of 2024. The manufacturing partners include Acer, Asus, Dell (NYSE:DELL), HP (NYSE:HPQ), Lenovo and Samsung.
Copilot Plus PCs will be driven by Windows on Arm. OpenAI’s GPT-4o will also be included on these devices in addition to the Copilot AI assistant.
The prime U.S. companies to benefit from the rise of AI PCs include Dell, HP, Apple (AAPL), Qualcomm, Intel, Nvidia (NVDA), Arm (ARM) and of course Microsoft, according to Morgan Stanley.
