Intel and AMD are counting on AI PCs to boost performance, but do consumers have the money to replace them?

【Lansheng Technology News】On November 2, after two years of growth caused by the new coronavirus epidemic, personal computer (PC) sales have been sluggish. The decline was so severe that the 7.6% year-over-year decline in third-quarter PC sales reported by market research firm IDC was a significant improvement after five consecutive quarters of double-digit declines. IDC expects global PC shipments to fall 14% this year to 252 million units, the company's lowest sales volume in more than a decade.

Strangely enough, however, PCs have been a lifeline for Intel and AMD this earnings season. According to AMD's third-quarter financial report released on Tuesday, PC business revenue increased by 42% year-on-year, becoming the chipmaker's only business to achieve growth in the quarter. Although Intel's PC business revenue fell 3% from the same period last year, this was much better than the 10% decline Wall Street expected.

For both companies, sales growth in the PC division offset more severe weakness in the data center unit. The data center unit represents the sale of expensive chips to technology giants that operate cloud computing, currently the chip industry's most critical market.

For both companies, sales growth in the PC division offset more severe weakness in the data center unit. The data center unit represents the sale of expensive chips to technology giants that operate cloud computing, currently the chip industry's most critical market.

For Intel and AMD, the market is also changing. The sudden explosion in generative artificial intelligence has led to a surge in demand for graphics processor-based accelerator systems. Technology giants such as Microsoft, Google, Amazon and Facebook parent company Meta have all shifted most of their capital expenditures to artificial intelligence server components, and Nvidia has become the main beneficiary.

In the six months to the end of September, Intel and AMD's combined data center revenue fell 11% year over year. According to Wall Street analysts' consensus forecast for Nvidia's fiscal third quarter ending in October, the company's data center revenue is expected to triple year over year.

Intel and AMD are not giving up on artificial intelligence. The companies plan to hold a grand launch event next month to showcase the new chips. AMD even surprised analysts on Tuesday by forecasting fourth-quarter and next year revenue for its data center GPU chips.

AMD expects the product line to bring in $2 billion in revenue next year. While it's a small fraction of Nvidia's projected data center sales, it represents strong growth for AMD. Wall Street expects AMD data center sales to surge 58% in 2024, to $10.4 billion, according to FactSet. The news pushed AMD's stock price up more than 7% on Wednesday.

However, AMD's PC business revenue is also expected to grow 27% next year, while Intel is expected to grow 13%. This reflects the high expectations placed on this mature market. This market was already on a downward trend in the years before the pandemic.

Personal computers powered by artificial intelligence, expected to hit the market next year, will be big sellers, at least judging by belief. "The arrival of AI-powered PCs represents an inflection point for the PC industry," Intel CEO Pat Gelsinger said on the company's earnings call last week. AMD CEO Lisa Su Su also predicted on Tuesday's conference call that AI-powered PCs "will fundamentally redefine the computing experience in the coming years."

However, whether AI-powered PCs can take over the mainstream remains elusive. Even if these new AI machines go on sale, many PCs sold during the worst of the pandemic will still be on a regular five- to six-year upgrade cycle and may not be easily replaced by users.

IDC predicts that global personal computer sales will grow by less than 4% next year. Many analysts predict that the industry's annual shipments will remain between 250 million and 270 million units, similar to before the epidemic. Getting consumers to spend more money on smarter computers, which are still mostly used for email and surfing the Web, can be a difficult task.