AI Is About to Remake the PC. These 2 Stocks Look Like Buys.

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AI's big opportunity goes beyond the cloud. How to play the future of PCs.

As sales of personal computers soared during the pandemic, you could almost hear PC makers saying, “We told you so.”

The working theory of AI has been that it requires big, powerful computers, driven by hard-to-find graphics processors, primarily from Nvidia . All of that computing—the creation of large-language models plus their continuing use—happens in the cloud. Meanwhile, laptops, desktop PCs, and even mobile phones become simply access points to the cloud, where AI services like ChatGPT do their computationally intensive magic.

Alex Cho, president of HP’s Personal Systems Group, goes further: “It will be a real inflection point for the category. There will be dramatically new use cases, benefits, and experiences.” It’s no surprise why the PC makers want in on the action: Research firm IDC recently forecast that enterprise AI spending would reach $143 billion by 2027, with a compound annual growth rate of more than 73%.The pandemic-era work-from-home trend triggered a big but ultimately misleading surge in PC demand. Global shipments reached 342 million in 2021, a 23% spike from prepandemic days, according to Gartner data. PC shipments were 279 million in 2019.

Apple has been including a neural engine as part of its homegrown processors since it introduced the A11 processor in the iPhone 10 in 2017. HP’s Cho imagines myriad new applications, ranging from AI software providing real-time coaching for game players to real-time language translation on conference calls. He sees AI PCs reaching 40% to 50% of laptop sales within three years.

Burd thinks applications like Microsoft 365 Copilot, which adds AI functionality to applications like Word and PowerPoint, will eventually run on PCs, rather than in the cloud. Rakesh Anigundi, an AMD director who leads the team building the company’s Ryzen AI chips, is convinced the trend will accelerate the refresh rate. “It makes PCs exciting again,” he says.

Yet it turns out that a substantial portion of AI-related computing can be brought back to the laptop more efficiently, securely, and affordably. One example of what’s possible comes from Rewind AI, a start-up backed by the venture firms Andreessen Horowitz and NEA. Intel recently unveiled an “AI PC Acceleration program,” which is intended to jump-start applications leveraging local use of AI techniques, in areas like content creation, security, audio effects, and video collaboration. “AI is good at generating something from nothing, or saving time in laborious human tasks,” Intel’s Hallock says.

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