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The PC industry is finally on the road to recovery
The turnaround in the global PC market continues to gain speed as the hype around AI PCs grows and enterprise customers start buying laptops and desktops. According to early data from market research firm IDCthe PC market grew 3%, marking the second quarter of growth after seven consecutive quarters of decline.
While that figure is higher than the 1.9% growth that rival firm Gartner says the market saw in the quarter, both numbers point to a recovery in a sector that was crushed after seeing its sales pull up early in the pandemic, which suppressed sales in subsequent quarters.
“Make no mistake, the PC market, like other technology markets, faces challenges in the near term due to maturity and headwinds,” said IDC’s group vice president. Ryan Reith.
“However, two consecutive quarters of growth, combined with a lot of market hype around AI PCs and a less compelling but arguably more important commercial upgrade cycle, seems to be just what the PC market needed. The buzz is clearly around AI, but there is enough going on with non-AI PC purchases to make this mature market show signs of positivity.”
In Q1 2023, Gartner reported that PC shipments fell a staggering 30% year-over-year before starting to climb again in Q2 2023, when the company reported that PC shipments fell 16%.
A closer look at the Windows Copilot key. (Image: Microsoft) (Microsoft)
The declines were a quick turnaround from the explosive growth the PC industry saw in the early days of the pandemic. Consumers and business customers stuck on their couches for months bought new systems for working from home and entertainment. But with so many people buying PCs at once, there were fewer customers needing new machines in subsequent months, causing sales to plummet.
Since then, sales have continued to improve as consumers began replacing the laptops and desktops they purchased in the early months of 2020.
The decline of the PC market has hit everything from software vendors like Microsoft (MSFT), which reported that Windows OEM sales, or sales of its Windows operating system to laptop and desktop makers, fell 39% in the company’s fiscal second quarter of 2023.
Intel (INTC) and AMD (AMD) saw similar declines, with Intel reporting that first-quarter revenue from its Client Computing Group, the organization responsible for PC chip sales, fell a whopping 38% compared to the first quarter of 2022. AMD reported a 65% drop in annual net revenue in its client group in 2023, from $2.1 billion to $739 million.
The market turnaround comes as the PC industry looks to AI PCs as the next growth stage for laptop and desktop makers. AI PCs are roughly defined as PCs that come equipped with specialized neural processing units.
The story continues
AMD has launched its first AI PC desktop chip at CES 2024. (Image: AMD) (AMD)
Microsoft is marketing AI PCs that include its Copilot technology as Copilot+ PCs. It’s a bit of a mouthful, and the company’s launch hasn’t gone exactly as it had hoped. Microsoft initially hoped to kick off its Copilot+PC push with a software feature called Recall, designed to capture screenshots of virtually everything you do on your computer, making it easier to pick up where you left off and keep you from getting lost while searching the web. But security researchers raised concerns about the app, and Microsoft was forced to backtrack on the feature to address any potential issues.
Intel, AMD, and Nvidia are also jumping on the AI PC bandwagon, with Intel and AMD both releasing chips for AI PCs, and Nvidia noting that PCs running its dedicated graphics chips can easily handle AI PC applications.
Qualcomm (QCOM) is also making a run at the AI PC market, launching its latest PC chip in Microsoft Copilot+ PCs, including the company’s Surface Laptop and Surface Pro. The chipmaker promises the kind of performance that Apple has been able to squeeze out of its MacBook Pro and MacBook Air laptops, including all-day battery life and exceptional processing power.
The AI PC market is still young—Microsoft only launched its Copilot+ PCs in May—and it’s unclear how many users will specifically opt for AI PCs for their capabilities versus how many will choose them simply because they’re the latest and greatest on the market. Still, the industry is clearly on an upward trajectory, and for PC makers, that’s what matters most.
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Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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