Editor’s note: “Why AI Will Drive Major PC Market Growth in 2024” was previously published in December 2023. It has since been updated to include the most relevant information available.
Surprise, surprise! Dell (DELL) stock is up more than 20% on the day right now.
Yes, that Dell – the old-school PC maker. In the 1990s, it was the hottest stock on Wall Street. But after the PC market hit a brick wall in the 2010s, the stock has gone absolutely nowhere…
That Dell is now up more than 50% this year and nearly 200% over the past 12 months.
And it’s all thanks to artificial intelligence.
In short, AI is creating a renaissance in the PC market. And stocks like DELL could party like it’s the 1990s all over again.
Back in the 1990s and early 2000s, the PC market grew like wildfire as everyone to buy computers and get connected to the internet. But in the 2010s, the market became saturated. There were no new PC buyers.
So – the market stopped growing. Global PC sales have been flat since about 2015. As a result, PC stocks have been flat, too. But we could be looking at the start of a massive PC upgrade “supercycle” that could make PC stocks the hottest on Wall Street once again.
An AI-Driven PC Boom?
Both Dell and HP plan to launch the first generation of what they’re calling “AI PCs” – PCs with artificial intelligence built into them.
They’ll come with the standard Central Processing Unit (CPUs) and Graphics Processing Unit (GPUs) that all advanced computers are outfitted with today. But they’ll also have Neural Processing Units (NPUs), which allow for AI to be run locally on the computers themselves.
Today, the only way to access AI is through the cloud. Users go to a website or mobile application, and a third-party cloud service provider delivers the AI service. This is called the AI-as-a-Service (AIaaS) model.
Typically, in this model, the cloud service provider gains access to users’ data and charges a fee for them to use that service regularly. Not to mention, it also requires the internet to use it.
But with AI PCs, there won’t be any data-sharing or recurring fees. Users will have artificial intelligence running locally and privately on their own computer. And they’ll be able to use it whenever, wherever – even without an internet connection.
Imagine being on your computer, pulling up Microsoft Office or Excel, and boom; there’s an AI assistant right there to help you craft whatever document or spreadsheet you’re working on.
You don’t need to open a separate window for ChatGPT or download and pay for Copilot. You just tap into the AI that is already built into your computer.
That is the widely accessible future that AI PCs will usher in.
And we think this future has huge economic potential.
The PC Market Could Turn Red-Hot in a Flash
Obviously, on the consumer side of things, it’s easy to see how these AI PCs become ubiquitous. One person buys one. Then everyone around them realizes how cool it is to have artificial intelligence built into your own computer. And suddenly, we see a major snowball effect, where everyone wants and gets their own AI PC.
But the bigger potential here lies on the enterprise side of things – because that’s where the benefits of these next-gen PCs will really shine.
It’s costly for a company to buy every employee a license to ChatGPT or Copilot. It’s also scary to openly share all your data with cloud AI platforms. But at the same time, it’s now absolutely necessary for companies to get the power of artificial intelligence into their employees’ hands.
And the only way to deploy artificial intelligence while minimizing cost and protecting data is to use AI PCs.
Therefore, we believe that when Dell and HP launch their AI PCs in 2024 and ‘25, companies across America will go on an AI PC shopping spree. It’s very likely that your next company laptop will be an AI PC.
What does that mean for the sleepy PC market?
The Final Word
According to research firm Canalys, the global PC market is set to grow by 8% in 2024 after contracting in both 2022 and ‘23. Then it’s expected to rise another ~20% in 2025.
And this coming AI PC supercycle is creating some compelling opportunities in PC stocks.
Just consider; HPQ trades at just 8X next year’s earnings.
That’s a dirt-cheap multiple. And it only make sense if HP isn’t going to grow over the next few years. But in fact, it could grow by more than 10% over the next two years.
Therefore, HPQ offers an underrated and undervalued way to play the AI Boom.
I wouldn’t be surprised if AI PC stocks go parabolic next year and end up being some of the market’s biggest winners.
But in fact, these stocks aren’t my favorite way to play the AI trend in 2024.
Rather, I’ve got my sights set on a different corner of the market. And it’s one that some of the world’s most powerful people and companies are pouring money into right now. Think Nvidia, Microsoft, Tesla, Amazon, Elon Musk and Jeff Bezos.
We believe we’re seeing the AI Boom’s next evolution unfold. And that means it’s time to grab your slice of the pie.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.