MW Microsoft and Qualcomm team up to make AI the future of the PC
By Ryan Shrout
Microsoft's AI vision is winning over customers and developers, and the tech giant intends to bring the industry along with it
At its annual developer conference called Build, Microsoft $(MSFT)$ this week took some big steps towards laying claim to a larger footprint of the AI computing space, particularly around the consumer products and services.
The event itself is targeting software developers and industry operations professionals with a range of sessions and keynotes meant to expound upon the range of tools and development options that Microsoft provides.
But the company also uses large gatherings of press and analysts to announce new products and large-scale initiatives across its ecosystem. On the docket for this week was a new family of Surface laptops and a new brand for a the category of PC it calls the "Copilot+ PC."
You may have heard the Copilot brand already from Microsoft; it was introduced last year as its AI-based assistant built into Windows and Office 365. Microsoft added a Copilot button onto the keyboards of new PCs that launched in January. But the classification of Copilot+ PC is an important milestone that creates opportunities and challenges for OEMs, PC silicon providers - and Microsoft.
New Copilot+ PCs that are shipping in June utilize a specific set of hardware that includes a requirement for a new processor, the NPU, or neural processing unit. There is a specific performance requirement for that part of the chip too, at 40 TOPS (trillion operations per second) or higher.
This new class of PC introduces new AI-enabled Windows features, the most impressive of which is called Recall. This software has the ability to remember everything you looked at or interacted with on your PC over the course of weeks or months, and uses an AI-based semantic search to allow you to use context clues to find data and answers. But this also means that we will have a bifurcated user base for Windows going forward: those that have these new AI features enabled by the NPU and those that do not, and cannot, have those capabilities without an upgrade. This has never happened for consumers in the Windows world.
From a market perspective, Microsoft expects the Copilot+ PC segment to drive 50 million unit sales over the next 12 months. That is just a portion of the overall annual PC addressable market, but with Copilot+ PCs as premium designs with higher price tags, this points towards an opportunity for all parties involved to grow revenue in the PC space.
The lead silicon partner for this Copilot+ PC revolution isn't Intel $(INTC)$ or AMD $(AMD)$, it's Qualcomm $(QCOM)$. It's new Snapdragon X Elite processor that is built on the same underlying Arm Holdings $(ARM)$ architecture that powers Apple $(AAPL)$ M-series chips for its laptops and iPads. Microsoft CEO Satya Nadella stated in interviews this week that utilizing this Arm-based Qualcomm CPU is what is allowing the company to compete with Apple for the first time. I expect the Snapdragon laptops to have at least a three-month head start in the market over other options.
Those other options will come from Intel and AMD later this year, with new chips that meet the performance requirements for AI processing to enable on-device Copilot+ features. The Intel Lunar Lake architecture and the AMD Strix Point chips will be announced at the Computex show in Taiwan in early June, but it isn't clear when systems using those chips will go on sale.
All major OEMs are on-board with Microsoft and the Copilot+ PC push. At the Build conference I saw laptops from Dell Technologies $(DELL)$, HP $(HPQ)$, Lenovo (HK:992), Samsung (KR:005930), ASUS (TW:2357) and Acer (TW:2353), in addition to the Surface designs from Microsoft directly, all using the new Qualcomm chip.
Even the retail leaders appear to be buying in, with Best Buy $(BBY)$ launching a preorder campaign for these new laptops with more the 20 different configurations available and shipping in June. It is rare to see that many designs and systems ready and coordinated for a single day release.
Additionally, Microsoft's Azure cloud service announced availability of an instance using the AMD MI300X GPU AI accelerator, a competitor to the Nvidia $(NVDA)$ H100. This marks an important milestone for industry acceptance and adoption of the AMD accelerators on its way to a $4 billion revenue impact for AMD.
From the events of this conference, it's clear that Microsoft is leading the vision for AI with consumers and developers, and intends to bring the industry along with it. With the new category of Copilot+ PC, enforcing strict hardware requirements on silicon chip providers, and creating the most robust set of software tools and APIs, Microsoft is hoping it can leapfrog the assumed leadership of Apple and the Mac.
Apple has its own developer event in June and the world will be watching intently to see how much (or little) Apple has to say about AI across its portfolio of hardware. If the rumors are true about the extent to which Apple will engage around AI, then Apple could find itself behind the curve - and the PC.
Ryan Shrout is president of Signal65 and founder at Shrout Research. Follow him on X @ryanshrout. Shrout has provided consulting services for AMD, Qualcomm, Intel, Arm Holdings, Micron Technology, Nvidia and others. Shrout holds shares of Intel.
More: Microsoft and Google are in an AI war. These stocks benefit from the arms race.
-Ryan Shrout
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May 23, 2024 07:15 ET (11:15 GMT)
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