According to Investor’s Business Daily, AI PCs utilize “neural processing units to enable on-device artificial intelligence functions such as natural language processing, image recognition and speech synthesis.” Additionally, AI PCs’ apps are quicker than those of standard PCs and laptops with AI have longer battery lives. Tech research firm Canalys estimates that 20% of PCs shipped this year will have AI capabilities. Moreover, tech research firm IDC noted that AI PCs will have higher average selling prices than their “dumber” counterparts.
Over the longer term, their penetration looks poised to surge tremendously, with JPMorgan estimating that they will account for over 40% of PCs shipped in 2026. Also importantly, PC makers are likely to benefit this year from purchases of new PCs by those who bought their computers during the pandemic, and they will also get a boost from Microsoft (NASDAQ:MSFT) ending its support for Windows 10 in 2025. Canalys predicts that U.S. PC unit sales will surge 5% this year before jumping another 8% in 2025. Here are three top PC stocks to buy to benefit from these trends.
Microsoft (MSFT)
Of course, many of the world’s PCs use Microsoft’s Windows operating system and Office software. Consequently, the software giant is likely to benefit from higher PC sales in 2024 and 2025. As I noted in the introduction to this column, tech research firm Canalys expects U.S. PC unit sales to advance 5% and 8% in 2024 and 2025, respectively.
Meanwhile, on July 17, Bank of America reported that Microsoft was making some progress selling its PC AI tool, CoPilot. Specifically, after speaking with firms that sell Microsoft’s products, the bank believes that nearly 2% of the companies that buy the higher tiers of Office are purchasing CoPilot.
Due to this data point, Bank of America forecasts that Office sales can grow 20% between June 30 and the end of 2025. Finally, the bank predicts that the revenue of the firm’s cloud business, Azure, jumped 31.5% last quarter versus the same period a year earlier.
Analysts, on average, expect the company’s earnings per share to advance to $13.30 in 2025, up from $11.80 this year and the $9.81 of EPS that the company delivered last year.
HP (HPQ)
The revenue generated by HP’s (NYSE:HPQ) Personal Systems unit, which includes its PC business, increased 3% last quarter versus the same period a year earlier to $8.4 billion. That very encouragingly represented the unit’s first quarterly year-over-year revenue increase since Q2 of 2022.
In additional positive news, the firm’s earnings per share, excluding certain items, climbed 4% YOY in Q2; also importantly, HP is integrating Nvidia’s (NASDAQ:NVDA) “pre-trained models and software” into its AI tools. According to HP CEO Enrique Lores, the move will enable the firm’s customers to more easily work with their “data science workflows” from any location. Finally, HP has unveiled over 100 AI-powered tools that will enhance users’ “productivity and collaboration,” Lores reported.
In the wake of HP’s Q2 results, JPMorgan kept an “overweight” rating on the shares, citing the PC maker’s ability to benefit from firms’ purchase of new PC and the advent of AI PCs.
Given these points and the stock’s low forward price-to-earnings ratio of 10.4 times, I view HP as one of the top PC stocks to buy.
Dell Technologies (DELL)
The Street appears to be quite upbeat on Dell Technologies (NYSE:DELL), while the company is poised to benefit from strong demand for its PCs and AI servers. Additionally, the forward price-to-earnings ratio of DELL stock is 16.6 times undemanding. Given these points, I view Dell as one of the top PC stocks to buy.
Indicating that the Street is bullish on the shares, Bank of America and Morgan Stanley have issued very positive notes on DELL stock in recent months, while the shares advanced 69% in 2024 as of the afternoon of July 22.
Last month, Bank of America asserted that Dell would grow going forward due to a high number of PC purchases, strong demand for its AI servers, and increased sales of its storage products. Additionally, on July 3, Bank of America added DELL stock to its list of best investment ideas.
After meeting with Dell last month, Morgan Stanley reiterated its view of Dell as a “top pick.” Following the meeting, the bank has more confidence in the outlook of the firm’s AI servers business, as it expects the unit’s engineering advantages to be sustained going forward. Morgan Stanley also predicts that the firm’s PC business will improve, and it believes that the shares can reach the $155-$200 level in the firm’s fiscal 2026.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.