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The PC industry is finally on the path to recovery

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The PC industry is finally on the path to recovery

The turnaround in the global PC market continues to gain speed as hype around AI PCs grows and enterprise customers start to pick up purchases of laptops and desktops. According to early data from market research firm IDC, the PC market grew 3%, marking the second quarter of growth after a staggering seven consecutive quarters of declines.

While that’s higher than the 1.9% growth rival firm Gartner says the market saw in the quarter, both numbers point to a recovery in a sector that was crushed after it saw sales pulled forward at the start of the pandemic, which suppressed sales in subsequent quarters.

“Make no mistake, the PC market, just like other technology markets, faces challenges in the near term due to maturity and headwinds,” said IDC group vice president Ryan Reith.

“However, two consecutive quarters of growth, combined with plenty of market hype around AI PCs and a less sexy but arguably more important commercial refresh cycle, seems to be what the PC market needed. The buzz is clearly around AI, but a lot is happening with non-AI PC purchasing to make this mature market show signs of positivity.”

In Q1 2023, Gartner reported that PC shipments collapsed a stunning 30% year over year, before beginning to tick back up in Q2 2023 when the firm reported PC shipments fell 16%.

A closer look at the Windows Copilot key. (Image: Microsoft)A closer look at the Windows Copilot key. (Image: Microsoft)

A closer look at the Windows Copilot key. (Image: Microsoft) (Microsoft)

The declines were a rapid turnaround from the explosive growth the PC industry saw in the early days of the pandemic. Consumers and enterprise customers stuck on their couches for months purchased new systems to work from home and for entertainment. But with so many people buying PCs at once, there were fewer customers in need of new machines in subsequent months, sending sales into a nose dive.

Since then, sales have continued to improve, as consumers have begun to replace the laptops and desktops they purchased in the early months of 2020.

PC market declines hit everything from software vendors like Microsoft (MSFT), which reported Windows OEM sales, or sales of its Windows operating system to laptop and desktop manufacturers, fell 39% in the company’s fiscal second quarter of 2023.

Intel (INTC) and AMD (AMD) saw similar declines, with Intel reporting that its first quarter Client Computing Group revenue, the organization responsible for PC chip sales, dropped an incredible 38% compared to Q1 2022. AMD reported a 65% year-over-year drop in 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 the AI PC as the next leg of growth for laptop and desktop manufacturers. AI PCs are roughly defined as PCs that come equipped with specialized neural processing units.

AMD is launching the first AI PC desktop chip at CES 2024. (Image: AMD)AMD is launching the first AI PC desktop chip at CES 2024. (Image: AMD)

AMD 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 exactly gone as it hoped. Initially, Microsoft was expecting to kick off its Copilot+PC push with a software feature called Recall designed to screenshot virtually everything you do on your computer, making it easier to pick up where you left off and keep you from losing your place while searching the web. But security researchers raised concerns about the app, and Microsoft was forced to pull back on the feature to address any potential issues.

Intel, AMD, and Nvidia are also getting in on the AI PC push, with Intel and AMD launching AI PC chips, and Nvidia noting that PCs running its dedicated graphics chips can easily handle AI PC apps.

Qualcomm (QCOM) is also making a run at the AI PC market, launching its latest PC chip in Microsoft Copilot+PCs including that company’s Surface Laptop and Surface Pro. The chipmaker promises the kind of performance that Apple has managed 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 new — Microsoft only launched its Copilot+PCs in May — and there’s still no sense as to how many users will specifically opt for AI PCs for their capabilities versus how many will them because they’re simply 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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