Will Windows drive a PC refresh? Everyone’s talking about AI

Morgan Stanley is betting AI PCs will drive the next wave of commercial fleet refreshes after Microsoft made public its line-up at Build, and is forecasting the machines will comprise 65 percent of total sales by 2028.

In a report titled “AI PCs to usher in the next leg of PC market growth,” the investment bank and financial services biz says it thinks businesses will “be the initial adopters of AI PCs given they are primarily being marketed as productivity tools.”

Around three-quarters of chief information officers are already in the process of reviewing the tech or are planning to do so, Morgan Stanley says. This will reduce the percentage of AI workloads being sent to the cloud with more processing done at a local level.

AI PCs, the report reckons, are estimated to “deliver a lower cost per query, lower latency, unlimited personalization, better availability and greater privacy and security.” They’ll also come with a $1,000+ price tag.

At its developer event a week ago, Microsoft promoted its AI PC plans by using Qualcomm’s Snapdragon X Elite and X Plus system-on-chips in the next generation Surface Laptop and Pro tablets, which are just two of 20 Copilot+ PCs Qualcomm has to launch.

All this comes against a backdrop of slowing PC shipments since the height of the pandemic: the industry shipped 259.5 million units in 2023, versus 341 million in 2021. The end of life of Windows 10 in October next year is expected to provide some uplift, but it seemingly isn’t the driver it used to be, and so vendors are searching for something else to provide the fuel.

According to Morgan Stanley, AI PCs are estimated to comprise two percent market share for 2024, rise to 16 percent next year, have 28 percent of the pie the year after, go up to 48 percent in 2027, and increase to make up 64 percent of the market at the end of the forecast period in 2028.

Microsoft said in March it is still trying to convince customers of the productivity benefits of Copilot, and is running proofs of concept, but not all CIOs or analysts are convinced.

Elizabeth Hackenson, CIO at Schneider Electric, said AI PCS were “rather costly,” and Jay Ferro, CIO at Clario, a clinical research data management business, said he was adopting a wait and see attitude to hold out for “more mature options, avoidance of early adopter costs, greater choice, and more solid case studies.”

Similarly, analysts think the time is not yet right for AI PCs. Ranjit Atwal, Gartner research director, told us previously: “If PC vendors insist on charging a premium for AI PCs without demonstrable benefits, then business will buy no-AI PCs or those with lower specs.” Forrester said there was still “no killer app” for the average information worker, despite 50 AI PCs being on the market.

“Forrester expects certain roles with high computing needs, such as creatives, data scientists, and developers, to benefit substantially from AI PCs. For most information workers, however, there simply aren’t enough game-changing applications for day-to-day work to drive rapid AI PC adoption,” it said last month.

That said, Canalys polled CIOs and found around a third of those quizzed warned they may delay PC purchasing decisions to see if advancements in AI tech are sufficient to influence their refresh process.

The word AI was mentioned excessively on Lenovo’s Q4 earnings call last week. CEO Yuanqing Yang told financial analysts: “AI PC is about to kickstart a new demand cycle for products with premium pricing and attractive features for commercial users.

“We expect that in the next three years AI PCs will gradually grow from premium to a mainstream segment,” he added.

“We are also gradually expanding from AI PC to AI phone and AI tablet, while building seamless collaboration among devices.”

Lenovo booked a 10 percent increase in revenue to $13.8 billion for its Q4 ended March 2024 [PDF]. Net profit doubled to $248 million. ®