The Emergence and User Demand for AI PCs

The development of AI PCs is reshaping the personal computing industry. Operating models have the risk of becoming obsolete. The lines between the OS, applications, and the app store are blurring. A new tech stack is potentially emerging. 

Hardware manufacturers must rethink their operating models and develop new core capabilities in order to be successful in this new competitive environment.  

Artificial Intelligence (AI) is significantly transforming personal computing, with major players introducing AI PCs into the market.  These new PCs are equipped with advanced AI processors that enable real-time data analysis, machine learning, and natural language processing.  While an exact definition of AI PCs is hard to pin down, generally there are two major criteria that a PC must meet to be considered an AI PC: 

Neural Processing Unit (NPU) or Graphics Processing Units (GPU) must be included. In addition to Central Processing Unit (CPU), specialized processing unit of a NPU or GPU must be in place to handle AI specific capabilities. 

Devices should have one, or more, AI models that can be run on the PC, the models should be standalone in the device.  

Consumer insights from AlixPartners research 

With this additional horsepower and expanded capabilities, the question many users are asking is: Does it make sense to purchase an AI PC and what value will it add? AlixPartners recently conducted a study to assess consumer sentiment on this topic and several interesting results emerged about what customers value most in PCs and their willingness to invest in new products with AI capabilities. 

Consumers are willing to pay more and buy enhanced AI PCs that improve their experience and productivity. Our study found that 54% of consumers would upgrade their computers with AI PCs within 1 year and pay a premium price for it. Online shopping, email/social media, web surfing and watching movies/shows are the top activities most consumers engage in on their personal computer. AI capabilities that optimize and enhance performance of those activities would be of priority interest to consumers. 

Many features of AI PCs are very appealing to consumers, including the ability to automatically optimize hardware performance (e.g. battery management) and alert you to computer issues before they occur so that you can take preventative action (e.g. problems with storage, processor overheating, corrupt files, etc.). 

Security remains a top concern when using computers. AI PC security enhancements are an enticing value proposition to consumers.  We found that 51% of our study respondents listed virus and malware infection as their main concern when using a computer. Having AI looking out for your security and privacy, as odd as that sounds, is something consumers would appreciate and value if done in the right way. 

Early adoption of AI PCs is encouraging. According to Catalyst, 20% of PCs shipped in Q3 2024 were AI capable. As AI PC manufacturers continue to refine and evolve what an AI PC is, keeping the consumer at the center of that journey is critical as we step into this new frontier of computing. In an age of extreme complexity and data overload, if the AI PC can simplify our interaction with technology and improve our productivity it will be a major step change.   

Activity by Major Players 

AI PC vendors are heavily investing in two key themes: 1) enhancing user productivity and 2) ensuring robust privacy. The latest AI systems integrated into devices like smartphones, tablets, and PCs are designed to significantly boost efficiency. These systems offer advanced writing tools that help users rewrite, proofread, and summarize text, as well as innovative image creation features that generate visuals based on user descriptions. Additionally, AI-powered personal assistants are becoming more intuitive, drawing from various apps and personal data to provide seamless, natural language interactions. 

On the privacy front, these vendors are setting new standards by focusing on on-device processing and secure cloud computing to protect user data. AI-enhanced PCs are also pushing the boundaries of performance with powerful Neural Processing Units (NPUs) that enable real-time translations and image generation. These devices are designed for efficiency, offering extended battery life and unique AI-driven productivity tools like easy information retrieval, real-time image generation, and live audio translations. By prioritizing both productivity and privacy, AI PC vendors are transforming the user experience and setting new benchmarks in the industry.

Future developments 

The rise of AI agents leads to an increased discussion on the future of technology stack, whether the traditional architecture (hardware, OS, application) will be replaced by a new and more AI-specific structure required by a heterogeneous hardware stack composed of not just the x86 WinTel CPU but a mix of GPU, NPU, and diversified CPU (e.g., ARM, X86, Risc-V).   

There are significant implications to both the operating system and application software: 

• Operating systems risk becoming obsolete. 
  • The heterogenous hardware architecture will perform better when optimized directly together with AI model(s) instead relying on a standardized OS. 
  • Multiple AI foundation models co-exist, each with its own “domain of expertise” (e.g., Apple Intelligence & OpenAI), that an orchestrator can be used to select the best one based on intention of AI agent.  
  • Human Computer Interface (HCI) will evolve beyond GUI to more natural human interaction, e.g. conversational, attention based, etc. 
• The boundary between OS, applications, and the app store is blurring. 
  • User’s manual invocation of specific applications can be replaced by automatic selection and orchestration of AI agents to execute one or several tasks. 

What does this mean for hardware manufacturers? 

The future success of hardware manufacturers, particularly those in the AI PC market, relies not just on the creation of superior products but on the establishment of a robust ecosystem where hardware manufacturers are at the core and deliver value to the consumer. For many companies, this will be a complex operating model transformation, encompassing advancements in core capabilities and areas such as: 

1. Better integration of partners into the development cycle
   1. Collaborative innovation: By involving partners early in the development process, manufacturers can leverage diverse expertise and accelerate innovation. This collaborative approach ensures that products are not only cutting-edge but also aligned with market needs. 
   2. Shared resources and knowledge: Integrating partners allows for the sharing of resources, technologies, and knowledge, leading to more efficient development cycles and reduced time-to-market. 
2. More complex support processes that simplify the customer journey 
   1. Streamlined customer support: As products become more sophisticated, support processes must evolve to handle increased complexity. This involves creating intuitive support systems that guide customers through troubleshooting and maintenance with ease. 
   2. Proactive customer engagement: Implementing proactive support measures, such as predictive maintenance and AI-driven customer service, can preempt issues and enhance the overall customer experience. 
3. Complex solution sales that meet the needs of an increasingly complex buyer landscape 
   1. Multi-stakeholder engagement: The buying process for AI PCs often involves multiple stakeholders, each with unique needs and concerns. Manufacturers must develop strategies to engage and address the requirements of all stakeholders, from IT departments to end-users. 
   2. Tailored solutions and consultative sales: Moving beyond traditional sales approaches, companies need to offer tailored solutions that address specific business challenges. This requires a consultative sales approach, where sales teams act as advisors, helping customers navigate the complexities of AI integration. 

By focusing on these key areas, hardware manufacturers can not only thrive in the competitive AI PC market but also set new standards for innovation and customer satisfaction.