Morgan Stanley: WoA AI PC strikes, has the era of AI personal computers arrived?

Author: Li Xiaoyin

Source: Hard AI

At the upcoming Taipei International Computer Show (COMPUTEX) in early June this year, Windows on Arm (WoA) AI computers (PCs) are expected to be a major focus.

According to a research report released by Morgan Stanley on May 14th, it is expected that CPU suppliers Qualcomm, NVIDIA, and MediaTek based on the Arm architecture will introduce chips with higher integration and energy efficiency at the event, potentially reshuffling the global PC semiconductor supply chain with the WoA AI PC trend.

Although not yet clearly defined, the industry currently has a relatively consistent understanding of AI PCs: AI PCs refer to AI computing that can be directly performed on the computer side without the need for a cloud platform or computing center, thus supporting generative AI functions out of the box.

WoA AI PC adds a basic condition to AI PC technology, which is the use of an AI PC with a CPU designed based on the Arm architecture.

Why adopt the Arm architecture?

Morgan Stanley points out in the report that the key advantage of the Arm architecture lies in its low power consumption. Therefore, it is expected that as AI PCs are implemented and rapidly adopted, WoA will become a major growth driver due to its lower power consumption.

Key to the Battle of AI PCs: Energy Efficiency

The report states that with stronger performance and better AI compatibility, WoA is expected to challenge Intel CPUs based on the x86 architecture in the AI PC market, where Intel currently dominates the PC chip market outside of Apple.

However, Morgan Stanley notes that the energy efficiency of chips is the key to victory, and this is precisely where Arm's advantage lies.

The report predicts that the penetration rate of AI PCs will increase from 8% in 2024 to 30%/50% in 2025-2026.

We expect that by 2027, the chip shipments of WoA AI PCs will reach 50 million units, exceeding market expectations by 60%.

According to reports, Microsoft has also increased its efforts in software development to facilitate chip manufacturers' transition to Arm architecture chips: "We believe that by 2025, Windows 12 may better support Arm architecture than the current Windows 11, with improved virtualization technology or software adaptability."

Who are the potential beneficiaries in the upstream and downstream?

"From the perspective of upstream chip suppliers, Morgan Stanley is optimistic about Qualcomm and MediaTek."

The report states that Qualcomm and MediaTek are currently the main suppliers of smartphone SoCs (System on Chip) based on Arm architecture, and have been adding AI computing units to their SoCs for years to enhance functionality, thus gaining an advantage in the WoA AI PC trend.

Morgan Stanley predicts that by 2026, WoA PCs are expected to contribute 5% of MediaTek's revenue.

The report estimates that Qualcomm will start shipping around 2 million WoA PC chips in 2024, followed closely by PC chips jointly designed by NVIDIA and MediaTek, which will ship in 2025.

"From the perspective of downstream applications, Microsoft may be the biggest beneficiary."

For Microsoft, ensuring that the Windows operating system continues to dominate the PC market is crucial in order to continue iterating and deploying AI services like Copilot.

Considering that Apple, Microsoft's main competitor in the PC operating system market, has already adopted its self-developed Arm-based products in MacOS. Therefore, AI PCs have become an important entry point for Microsoft to focus on WoA again.

Earlier reports have indicated that NVIDIA and AMD both plan to collaborate with Microsoft to provide Arm-based designs on a broader scale, support the Windows operating system, and plan to launch Arm processors for client PCs in 2025.

Looking across the entire chip market, although WoA is expected to bring a "reshuffle" to the PC chip market, NVIDIA's position as the "chip leader" may not be easily shaken.

The report explains that integrating NVIDIA's graphics cards and MediaTek's Arm-based CPUs on the same chip would require key technologies such as TSMC's CoWoS packaging technology and NVIDIA's NVLink interface.

Furthermore, WoA falls within the realm of edge AI and has not yet become the mainstream direction of AI technology development, which is not enough to significantly impact NVIDIA. Instead, Intel and AMD—both of their shares in the Windows PC market may shrink