HP CEO Says AI Would Help Create New PCs: Would It Help Beat the Slowdown?

HP Inc. released its earnings for the fiscal second quarter of 2023 yesterday. While the company’s PC sales fell as expected, its CEO Enrique Lores said that AI would help create new PCs which could be launched as soon as the next year.

The company’s revenues in the quarter fell 21.7% YoY to $6.97 billion which trailed analysts’ estimate of $7.31 billion. The company’s Personal Systems revenues fell 29% – led by a 28% fall in shipments.

Global PC sales fell 29% YoY in the first quarter of 2023. Apple saw the worst decline among major players as Mac shipments fell 40%.

However, in smartphones, Apple outperformed the wider industry, and its shipments in the March quarter were similar to the last year even as the industry contracted 14% in the quarter.

The demand for gadgets like PCs and smartphones surged in the initial days of the pandemic. However, it also led to a demand-pull forward which is now manifesting in falling sales.

Almost all the companies in the ecosystem, from PC makers, chip manufacturers, and memory companies are hurting from the slump in the industry, which is only magnified by higher inventories.

HP does not see any major revival in the PC industry in the near term and said that the global economic environment is uncertain – while adding “we continue to see cautious consumer discretionary spending, while enterprises are delaying capital investments.”

HP Says AI Would Help Create New Type of PCs

During the earnings call, Lores said that HP is focusing on the opportunities that generative AI is creating. He said, “We are actively working with our major software and silicon partners to engineer new architectures that will integrate AI applications into everyday use cases.”

He added, “This is a very exciting opportunity. In the same way, the Internet age fundamentally changed the way people use computers, I believe the age of AI will transform the role PCs play in our lives.”

Lores’ views are similar to what Nvidia’s CEO Jensen Huang echoed during the company’s earnings call last week where he said, “The computer industry is going through two simultaneous transitions — accelerated computing and generative AI.”

Nvidia’s valuation just reached $1 trillion.

It becomes just the 9th company in history to reach that milestone.

The AI frenzy has fueled its business.

Here’s more on the journey… 🧵 pic.twitter.com/ijgEBJkG45

— Jon Erlichman (@JonErlichman) May 30, 2023

Nvidia stock has surged since the earnings release and has joined the trillion-dollar market cap club – with the stock’s rally triggering a rally in all AI and related stocks.

Meanwhile, speaking with Jim Cramer on CNBC, Lores said, “We think there is really an opportunity to create a new category of PCs that will drive significant refresh in the category.”

He added that AI would “help us to redefine what a PC is, the experiences that customers will be able to get are going to be much different, and we are working with all the key software vendors, key silicon providers to redesign the architecture of a PC.”

Tech Companies See a Big Opportunity in Artificial Intelligence

Tech companies see a massive opportunity in AI and are collectively investing billions of dollars to build AI capabilities.

A new collaboration between @bhp & @Microsoft has used #artificialintelligence #machinelearning with the aim of improvingrecovery at the world’s largest #copper mine, #Escondida, through use of new digital technology to optimise concentrator performance https://t.co/GdK0lVMHqz pic.twitter.com/DepFB7ok0Q

— International Mining (@im_mining) May 30, 2023

Yesterday, BHP Group – the world’s largest miner and operator of the world’s largest copper mine Escondida – announced a partnership with Microsoft to improve the yields at the aging copper mine using AI.

As for HP, the stock is trading lower in US premarkets today after disappointing earnings. The stock has however gained 15% so far in 2023 amid the broader market rally.

The AI-based PCs might help the company beat increase sales over the medium term – but in the short-term, the PC industry continues to witness a terrible slowdown.

Incidentally, last year Warren Buffett’s Berkshire Hathaway also took an over 12% stake in HP which makes the conglomerate its biggest stockholder.

Buffett meanwhile is not too impressed with the AI hype and compared it with an “atom bomb” at Berkshire’s annual meeting earlier this month.

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