By Angela Palumbo

Artificial intelligence personal computers have made a splash at the CES conference this week, but concerns regarding demand haven't gone away.

Investors and consumers have been tuned into the annual CES trade show this week as tech companies from around the world visit Las Vegas to unveil their newest product and software updates.

One highlight from the week has been the display of new gen-AI PCs and chips. Nvidia unveiled Project Digits, a $3,000 AI personal supercomputer. Dell Technologies announced that it has redesigned its entire PC portfolio to make it more simple for the consumer as it develops new AI hardware. Meanwhile, Qualcomm and Advanced Micro Devices both showed off new AI PC processors.

But while all of these new announcements are being made, there is still the question as to what the PC market will look like in the year to come. On one end, there's excitement about the new capabilities of these devices. On the other, not all of the AI tech is available yet, and the economic environment doesn't look like one that will support a major PC refresh cycle this year.

PC demand popped during the Covid-19 pandemic when people were working and taking classes from home. The increase in purchases during that time, along with an increase in inflation and interest rates since then, has since led to a decline in the demand of these devices. Businesses have also cut back on budgets, impacting the purchasing of PCs.

Ryan Reith, program vice president for IDC's mobile device tracker suite, told Barron's that while 2025 should be a better year for PCs, demand will remain challenged.

"The macro environment today, and still probably at least for the foreseeable future for this year, is going to be challenged and looked at with a level of scrutiny by companies and how they spend their money, " Reith said. Both interest rates and inflation are expected to remain higher for longer, and even with new AI PCs and chips coming out, that doesn't bode well for demand.

Reith also said that companies and consumers are waiting to see the "use cases," of these computers, meaning they want proof of how well the AI performs and if its worth the investment right now.

"That gen-AI stuff that essentially could do much more work load and help me do like 10 times my work efficiency -- that hasn't been shown," he said. "So it's kind of hard to convince me to buy a more expensive PC to do that on the hopes that these things will come in the next two months, three months, whatever."

PC growth is still expected in 2025 when compared to 2024, especially for enterprises, Reith added. Windows 10 will reach the end of its lifecycle on Oct. 14, according to Microsoft, which has dubbed 2025 the "year of the Windows 11 PC refresh." After this date, Windows 10 PCs will no longer receive security or feature updates. Reith said the security implications alone will push businesses to update their devices.

"According to IDC, nearly 80% of businesses are planning to refresh their PC portfolio by the end of 2025, and 70% of consumers will refresh their PCs in the next two years, emphasizing the increasing demand for secure, advanced AI-enabled hardware that Windows 11 PCs provide," Microsoft said in a blog on Monday.

Investors will be paying close attention to whether or not that's true.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 08, 2025 15:47 ET (20:47 GMT)

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