Don’t look now, but “old-school” PC stocks are on fire.
Yes, I’m talking about those PC stocks — the old-school computer makers like Dell (DELL) and HP Inc (HPQ).
Once upon a time, PC stocks were the hottest trade on Wall Street. That was back in the 1990s during the Dot-Com Boom, when everyone was buying a new computer. Now, though, everyone has a computer, and for the past 20 years, old-school PC stocks like Dell have gone nowhere.
Until now.
Over the past year, Dell stock has soared 200%. HP stock, meanwhile, has surged 42% higher since late September.
These stocks have been huge winners over the past few months.
Why? Artificial intelligence.
In short, AI is creating a renaissance in the PC market wherein PC stocks like Dell and HP could party like it’s the 1990s all over again.
The AI Renaissance
The story here is pretty simple yet very powerful. It is perhaps the biggest story in AI that no one is talking about right now.
The PC market grew like wildfire in the 1990s and 2000s as everyone and their best friend rushed to buy computers to get connected to the internet. But, in the 2010s, the market became saturated. Everyone had already bought a desktop computer. And a laptop. And a tablet.
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 “super cycle” in 2024 and 2025 which could — for the first time in 20 years — make PC stocks the hottest stocks on Wall Street again.
It is all thanks to AI.
This year, both Dell and HP are launching the first generation of what they’re calling “AI PCs”, or AI-enabled PCs.
These are PCs with AI built into them.
They’ll come with your 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 (or NPUs) which allow for AI to be run locally on the computers themselves.
What’s the big deal?
AI PCs will unlock the next wave of AI productivity benefits.
Today, the only way to access AI is through the cloud. You have to go a website or a mobile application, and the AI service is delivered to you through a third-party cloud service provider. This is called the AI-as-a-Service — or AIaaS — model.
Typically, in the AIaaS model, the cloud service provider gets access to your data and charges a fee for you to use that AI regularly. Not to mention, you have to be connected to the internet to use it.
But, with AI PCs, there won’t be any data-sharing or any recurring fess. You will have AI running locally and privately on your own computer, and you’ll be able to use it whenever or 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 on your computer than helps you craft whatever document or spreadsheet you are trying to create.
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 starting this year.
This future has huge economic potential.
The Ubiquity of AI PCs
Obviously, on the consumer side of things, it is easy to see how these AI PCs become a ubiquity. One person gets it, everyone around them realizes how cool it is to have an AI built into your own computer, and suddenly, you get a snowball effect to where everyone wants and gets an AI PC.
But the bigger potential here lies on the enterprise side of things, because that’s where the benefits of AI PCs will really shine.
It is expensive to buy everyone at a company a license to ChatGPT or Copilot. It is also scary as a business owner to willingly and openly share all your data with cloud AI platforms. But, simultaneously, it is absolutely necessary for companies to get the power of AI into their employees’ hands.
The only to do all three of those things – deploy AI while minimizing cost and protecting data – is to use AI PCs.
Mark my words. As Dell and HP launch their AI PCs this year and next, companies across America are going to go on an AI PC buying spree. It is very likely that your next company laptop will be an AI PC.
What does that mean for sleepy PC market?
Explosive growth for the first time in 20 years.
According to research firm Canalys, the global PC market is set to grow by 8% in 2024 after contracting in both 2023 and 2022. It is expected to rise another ~20% in 2025.
The major players in the PC market are already starting to see the benefits of this upgrade cycle.
This past week, both Dell and HP reported earnings. Dell reported positive revenue growth for the first time since summer 2022. HP reported positive revenue growth in its core Personal Systems business for the first time since early 2022. Both companies expect revenue growth trends to strengthen and improve in the coming quarters. Both companies chalked up the improving trends to strong early demand signals for their new AI PCs.
Even Best Buy (BBY) is starting to find its groove again. That stock has popped about 20% over the past several days because the electronics retailer just reported stellar earnings which illustrated signs of consumers starting to flock to Best Buy stores to upgrade to AI PCs.
The AI PC party has begun.
The Final Word
But this party is likely still in the first few innings.
It is becoming very clear that AI is starting to produce significant financial benefits for companies that are strategically using AI to drive increased demand and operational efficiency.
We expect these AI-powered financial benefits to last for years.
As they do, AI stocks will stay red-hot. They’ll keep partying like internet stocks in the 1990s.
If you haven’t already, it is time to join AI party.
Click here to learn about some of the best AI stocks to buy today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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