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Artificial intelligence is breathing new life into many industries. One unexpected beneficiary is personal computers, a sector that had been suffering a two-year global demand slump. Stronger than expected earnings this week at the world’s largest PC maker offer confirmation that AI-enabled devices will mean new growth.
China’s Lenovo Group reported a 9 per cent rise in revenue to $13.8bn for the March quarter, marking the second straight quarter of sales growth, a turnaround following five quarters of declines. Net profit for the quarter more than doubled.
Among the long list of industries perceived to gain from the hype around generative AI, the boost the PC sector should soon enjoy is one of the most straightforward. PCs equipped with faster processors and AI algorithms that can generate conversation, images and real-time language translation are already here.
As companies such as Intel provide advanced chipsets for PCs to carry out new AI operations and process large workloads, that naturally means these PCs will be offering higher performance and more efficient power usage. All this should mean an improvement in everyday user experience and enhanced gaming environments.
Lenovo and Huawei stand to be the biggest beneficiaries of new demand in China. China’s Huawei was one of the first PC makers to use Intel’s latest chipsets for its first AI-powered PC that uses its own large language model. Intel forecasts 100mn AI PCs powered by its advanced processors will be shipped by next year. Overall demand in China’s PC market, excluding tablets, is expected to return to growth this year, following a sharp slowdown in 2023. Growth could hit 10 per cent next year, according to Canalys.
Shares of Lenovo have risen more than 50 per cent in the past year reflecting hopes for a revival in the PC sector. Yet the company has still significantly underperformed global peers such as Dell, whose stock has more than tripled over the past year, as well as regional rivals such as Acer and Asustek — both up about 70 per cent. Lenovo trades at 14 times forward earnings at a discount of more than a quarter compared with Dell.
A big part of Dell’s rally comes from growth expectations from its AI server business. Lenovo has also been expanding its AI infrastructure offerings with a line of servers and data centre solutions. This fast-growing sector should act as an effective revenue hedge during future cyclical downturns in the PC business.
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