- AI-capable PCs will boost current and future replacement cycles.
- PC vendors are set to launch a slew of AI-capable PCs in the coming quarters.
- Despite its advantages, Apple faces challenges in penetrating a market where Microsoft’s Windows is deeply entrenched.
- Commercial adoption is expected to pick up more rapidly from 2024 onwards, and by 2027, 60% of all AI-capable PCs will be shipped to businesses.
Major PC vendors have publicly signaled that AI-capable PCs will be the most significant upcoming innovation that they are looking to leverage as an accelerator for market recovery in 2024 and beyond.
The launch of ChatGPT in November 2022 was a watershed moment, and after rapid growth, generative AI is now positioned as the single most impactful accelerator across nearly every facet of the technology industry.
However, according to Canalys Special Report on “Now and next for AI-capable PCs”, effectively capturing the opportunity will require a growth mindset from all players.
Firstly, PC vendors must develop business models that stretch beyond hardware sales to deliver differentiated native AI capabilities.
Secondly, businesses and users must view AI-capable PCs as part of a larger goal to modernise operations, upskill workforces and participate in the AI revolution through enhanced efficiency and novel experiences.
Finally, AI solution providers require an evolving perspective to optimize models for on-device use, enabling ambient computing across edge devices within the broader landscape of hybrid AI experiences.
Fundamentally, AI-capable PCs will only fulfill their potential if industry leaders adopt an open and forward-thinking approach.
Opportunities
Canalys proposes an initial definition of an AI-capable PC as a desktop or notebook with a dedicated chipset or block to run on-device AI workloads.
As technical capabilities, use cases, AI tools and customer requirements evolve, additional hardware will need to be considered to identify PCs that are optimised for on-device AI workloads.
Examples of these dedicated chipsets include AMD’s XDNA, Apple’s Neural Engine, Intel NPU and Qualcomm’s Hexagon Tensor Accelerator.
“Vendors must build trust and be transparent around privacy and ethical AI practices to overcome user resistance. Companies need to pilot on-device AI to quantify outcomes and construct business cases to convince partners of the opportunities.
Individuals must understand the technology and provide feedback to shape its development responsibly. With collaboration, AI-capable PCs can transform how we learn, work and create for the better, delivering new innovations and capabilities,” the report said.
Alongside current Mac products, AMD Pheonix and Intel Core Ultra devices, PC vendors are set to launch a slew of AI-capable PCs in the coming quarters.
From a strategic perspective, bringing these new products to market amid the peak wave of Windows refresh will help provide a more compelling reason for customers to transition away from Windows 10. It will also drive users into more premium price bands, with AI-capable PCs expected to be 10% to 15% more expensive than similar models without embedded AI capabilities.
But the success of this effort will depend on the vendors working with their key partners (including Microsoft, chipset vendors and B2B and retail channels) to deliver a very clear and unified message about the specific benefits of on-device AI to consumers, businesses, educators and others.
Market forecast
Canalys forecasts that 19% of PCs shipped in 2024 will be AI-capable under its initial definition and will ramp up quickly with the tailwind of a refresh cycle, leading to 60% of PCs shipped in 2027 being AI-capable.
Commercial adoption is expected to pick up more rapidly from 2024 onwards, and by 2027, 60% of all AI-capable PCs will be shipped to businesses.
The report said that the emergence of AI-capable PCs brings with it several key opportunities for industry players, including a boost to current and future device refresh cycles and the chance to meaningfully differentiate with out-of-the-box AI tools and attached services.
The AI-capable share of total PC shipments is expected to rapidly escalate from 2025 as customers are pushed to refresh devices before the end of service for Windows 10 in October of 2025.
From 2026 onwards, AI-capable PCs are forecast to account for most PC shipments.
More nuanced grading system
The long-term trajectory for commercial adoption of AI-capable PCs will be positive. In 2027, shipments just to businesses are expected to exceed 100 million devices out of a total of 174 million.
More than 60% of all PCs shipped to businesses will be AI-capable, representing a 94% CAGR for the category from 2023 to 2027.
Though the CAGR for AI-capable PC shipments to consumers will be a more modest 42% over the same timeframe, the category’s share of the overall consumer PC market will catch up to the commercial sector in the longer term.
As AI applications proliferate over the next few years, this will also set the stage for a more nuanced grading system based on each PC’s AI functionalities and capabilities.
While most PCs shipped after 2027 are likely to meet Canalys’ initial definition, it will be important for customers to be able to distinguish the devices that are best suited to run their specific workloads and that can optimally leverage the suite of AI tools that they choose to invest in. Long-term considerations could include:
- AI-capable PCs could incorporate large language models (LLMs) of a certain parameter size that come pre-installed on the device.
- AI-capable PCs could be benchmarked on the speed of on-device text and image generation. Some benchmarking examples to be considered from 2025 and beyond are listed below, with the specifics likely to evolve over time as on-device AI capabilities improve.
Microsoft to be an influential leader
Microsoft is perhaps the foremost example of a company betting big on AI to define its future success. On top of its estimated $13 billion commitment to OpenAI, it has also invested in companies such as Inflection AI, Adept AI and Builder.ai.
While a large part of its AI strategy is focused on providing cloud-based services through Azure, its massive global Windows PC installed base represents a crucial vehicle for delivering new AI experiences to users and convincing developers to create the best AI applications for its ecosystem.
A significant focus during Microsoft Build in both 2022 and 2023 was the development of hybrid AI experiences spanning cloud-to-device to leverage the benefits of each as use of AI tools proliferates.
It has recently made the “Hybrid AI Loop” available, an open-source ONNX Runtime that “supports the same API for running models on the device or in the cloud, enabling hybrid inferencing scenarios where [a developer’s] app can use local resources when possible and switch to the cloud when needed.”
Microsoft’s decision in November 2023 to bring Copilot to Windows 10 devices is another strong signal of its commitment to driving user adoption of its native AI tools as part of its AI strategy.
Microsoft clearly has a strong desire to migrate its PC user base over to Windows 11 as quickly as possible, with the end-of-service date for Windows 10 looming. But it has also recognised that a slow transition must not be a roadblock to people and businesses incorporating AI experiences into their everyday lives and work.
The short-term goal must be to increase penetration and deliver compelling use cases to users with a longer-term view to making the move to future Windows versions exciting by offering new features and significant improvements to AI experiences.
Apple has AI at the core of its Macs
Macs have been the only mass-market AI-capable PCs since 2020, when Apple began transitioning from Intel processors to the M1, bringing the Apple Neural Engine (ANE) to the Mac portfolio. The first-generation ANE was released as part of the A11 chip, found in its 2017 flagship smartphone, the iPhone X. Today, every shipping Mac has the Neural Engine.
But the company has taken a conservative approach when it comes to incorporating the term “AI” into its product marketing. When asked about the company’s apparent lack of “AI” announcements during its Q4 earnings call, Tim Cook stressed the integral role it has in virtually all Apple products, but that the company tends to “label them as to what their consumer benefit is.”
This is true, Apple has integrated many features into macOS that are powered by machine learning.
Apple has significantly grown its market share among commercial PC deployments in the last several years, catalyzed by the transition to Apple Silicon. F
Furthermore, a wave of PC refreshes from the Windows version transition is often seen by Apple as an opportunity to make further share gains, especially among businesses.
The question facing Apple now is whether Copilot and the slew of Windows-based AI-capable PCs represent a big enough threat to Apple’s further growth, especially in the short term.
Apple’s share gain in the commercial sector did not occur because organizations moved away from Word, Excel and PowerPoint to Pages, Numbers and Keynote. The Mac’s value proposition has been highly powerful computers, an increased return on investment and, most importantly, how it fits within a company’s existing IT ecosystem.
As of today, the Office suite can run natively on Mac and essentially all existing Copilot features are able to run on Mac because the functionality sits in the cloud.
But if and when Copilot moves to a hybrid cloud/on-device setup to capture the respective benefits of each, this could change the dynamic. Although this assumes that the trend of collaboration between Microsoft and Apple reverses or slows, and that Copilot would not be brought to a hybrid version on Mac.
Despite its advantages, Apple faces challenges in penetrating a market where Microsoft’s Windows is deeply entrenched. Many businesses are heavily invested in Microsoft’s ecosystem, with established workflows and legacy systems.
Apple’s strategy, therefore, might focus not on displacing Microsoft entirely but on carving out niches where its unique strengths in design, user experience and AI capability can be fully leveraged. Apple’s focus is on select verticals, “Pro” users and industries where its products have traditionally been strong, such as creative fields, marketing and software development.
These are all fields that will see large benefits from workers upskilling through leveraging AI. These fields have also been identified by Canalys as the early adopters of AI-enabled PCs. Success here will help Apple then expand to other sectors by showcasing the benefits of its AI capabilities and ecosystem integration.
As Intel, AMD and Qualcomm progressively integrate AI capabilities into their CPU product lines, Windows-based AI-capable PCs from a variety of OEMs will become major growth drivers.
The significant improvements in efficiency and productivity are particularly appealing to the commercial sector, especially for tasks such as data processing and content creation.
Commercial sector to lead adoption
Commercial adoption of AI-enabled PCs is set to begin in a very targeted manner. Higher prices and a cost-sensitive market will initially limit these powerful devices to niche roles within organisations.
As businesses recognise the productivity gains and operational efficiencies enabled by AI, Canalys expect a shift toward mainstream acceptance.
Pioneers in this space, such as research and development professionals, data analysts, and creative designers, will showcase the tangible benefits of integrating AI into their workflows, setting a precedent for broader corporate uptake and IT decision-maker buy-in.
The commercial sector is on the cusp of transformation, with AI-capable PCs at its core. Strategic adoption by tech-savvy businesses will catalyse this change, prioritizing job functions where AI’s impact is immediate and pronounced.
The future of work will be redefined by AI-driven features that enhance collaboration, streamline content generation and optimize audio and video for a more connected and efficient workplace.
Consumers seek productivity improvements
AI-capable PC adoption among consumers is expected to be lower than in the commercial segment in the long run. But consumer interest in generative AI applications is growing and use is becoming more sustained.
Users are gradually becoming aware of the array of services on offer and how they can leverage them to improve their computing tasks.
For those who have incorporated generative AI into their daily lives, use is robust, with a frequency spanning daily interactions to weekly engagements.
To leverage this positive trend in awareness of generative AI and usage behavior leaning toward convenience and ease of use, PC OEMs have an excellent opportunity to provide some differentiated AI features to consumers while operating system providers, such as Microsoft, fully control and unify the user experience around productivity and security features improved by AI.