PC — Update — November 1, 2023

Locator: 45907TECH.

Link here.

Fascinating story.

It’s a testament to how odd the chip market is right now that personal-computer demand is actually a source of strength. 

PC sales have been in a downspin since early last year, following two years of pandemic-induced growth. The downturn has been such that the 7.6% year-over-year decline in unit sales that market-research firm IDC reported for the third quarter actually counted as a notable improvement, as sales had been falling by double digits for the previous five periods. IDC projects PC shipments will total 252 million units globally this year—down 14% from last year and the lowest annual sales number the firm has reported in more than a decade. 

Oddly, PCs have also proved to be the saving grace for Intel and Advanced Micro Devices this earnings season. AMD reported Tuesday afternoon that revenue for that segment jumped 42% year over year during the third quarter—making it the chipmaker’s only business to show growth for the period. 

Intel’s PC revenue slipped 3% from a year earlier, but that was far better than the 10% drop Wall Street had expected. And for both companies, sales in their PC divisions offset more serious weakness in their respective data-center segments—which represent the pricey chips sold to tech giants operating cloud-computing networks that is now the chip industry’s most crucial market.

For Intel and AMD, that market is also in a bit of a transition. The explosive popularity of generative artificial intelligence has blown up demand for one type of chip—the graphics processor-based accelerator systems made by Nvidia. 

Tech giants such as Microsoft, Google, Amazon and Facebook-parent Meta Platforms have all redirected much of their capital spending toward AI server components—benefiting Nvidia primarily. Intel and AMD’s combined data-center revenue for the six-month period ended September fell 11% from the same period last year. Nvidia’s data-center revenue is estimated to have tripled in roughly the same time, based on Wall Street’s consensus projections for the company’s fiscal third quarter that ended in October. 

Intel and AMD are hardly giving up on AI. Both are planning splashy media events next month to showcase new chips for the market, and AMD even surprised analysts on Tuesday by projecting revenue specifically for its data center GPU chips for the current quarter and next year. The company expects $2 billion from that product line next year, which is a fraction of Nvidia’s projected data-center sales for the same time but would represent a strong uplift for AMD. Wall Street is now expecting the company’s data-center sales to surge 58% in 2024 to $10.4 billion, according to FactSet. That disclosure helped AMD’s shares jump more than 7% on Wednesday. But AMD’s PC revenue is also expected to jump 27% next year, while Intel’s is expected to rise 13%. That reflects high hopes for a mature market that largely logged annual sales declines in the years ahead of the pandemic. And at least some of that optimism seems tied to the belief that AI-enabled PCs expected to hit the market next year will be big sellers. 

“The arrival of the AI PC represents an inflection point in the PC industry,” Intel Chief Executive Officer Pat Gelsinger said on his company’s earnings call last week. Lisa Su, CEO of AMD, likewise predicted on Tuesday’s call that AI PCs “will fundamentally redefine the computing experience over the coming years.”

Much more at the link.

I find this absolutely fascinating.