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The AI Revolution: Fueling the Recovery of PC Demand

The world of personal computers (PCs) is on the brink of a transformation, driven by the rise of Artificial Intelligence (AI) PCs. This change is set to not only rejuvenate the PC market but also redefine our computing experience.

AI and PCs


1.       Changing Growth Trajectory of PC Shipments

Despite a recent slowdown in commercial PC orders, the future looks promising for the PC market. Indeed, the recovery of PC unit sales is based on three main factors: 

  • Aging Installed Base: Many PCs bought during the COVID-19 pandemic are now reaching the end of their useful lives. This aging installed base will soon need replacements. 
  • Windows 10 End of Life: Microsoft has announced that support for Windows 10 will end in October 2025. This will push many users to upgrade their systems. 
  • Adoption of AI PCs: The introduction of AI-powered PCs is expected to drive significant demand.

In the first quarter of 2024, the top five notebook manufacturers (Quanta, Compal, Wistron, Inventec, and Pegatron) saw a 1% year-over-year increase in shipments. This marked the first quarter of growth since the end of 2021. We believe that 2023 was the low point for PC sales, and we expect a significant increase in shipments in 2024. 

This recovery is set to benefit major PC vendors like Microsoft, Dell, HP, Lenovo, Apple, and Samsung. 

2.       AI PCs: The Next Big Thing

So, what exactly is an AI PC?

An AI PC is a computer equipped with advanced components like a Neural Processing Unit (NPU), which enhances its ability to handle complex tasks quickly. Think of the NPU as a mini version of the powerful processors used in data centers, designed to perform rapid calculations with high precision.

Microsoft has already jumped on this trend, announcing a new category of PCs called Copilot+ PCs with multiple new AI functions integrated into Windows. This move follows closely on the heels of Apple's recent M4 processor event, signaling an intensifying competition for AI PCs and the race for faster processing speed in CPUs, or “TOPS” (Trillions Operations per Second – the number of computing operations an AI chip can handle per second).


Chart 1: AI PC penetration to rise to 65% of the total PC market by 2028.

Chart showing AI PC penetration to rise to 65% of the total PC market by 2028.

Source: Morgan Stanley Research


The first AI PCs will be powered by Qualcomm's new ARM-based Snapdragon X Pro/Elite processors, offering over 40 TOPS of computing power. Intel and AMD are also set to release their AI-capable chips later in 2024. 

1.       The Impact of AI on PC Components

The introduction of AI PCs is expected to increase the cost of components by 20-30%, mainly due to upgrades in CPUs and memory. This could add about USD30 billion in revenue for global semiconductor companies. The Windows AI PC is reshaping the global PC supply chain, with companies like Qualcomm, NVIDIA, and MediaTek introducing more integrated and power-efficient chips. 

Chart 2: High Bandwidth Memory demand is nearly 2x the 2023 level, illustrating the rise in component demand.

Chart showing High Bandwidth Memory demand is nearly 2x the 2023 level, illustrating the rise in component demand.

Source: Morgan Stanley Research


By 2027, the volume of Windows on ARM (WoA) PC chips could reach 50 million units, generating around USD10 billion in CPU revenue. AI PCs are expected to drive up the average selling prices of PCs by 5-10%, with unit sales increasing by 6% year-over-year to 286 million units. 


What is next?

The rise of AI PCs is not just a trend; it’s a revolution in the PC market in our view. As AI technology becomes more integrated into our daily computing tasks, the demand for more powerful and efficient PCs will only grow. In our view this transformation is poised to benefit not just PC manufacturers but also component suppliers and semiconductor companies.


This article is brought to you by the Advisory Solutions Team.