Microsoft Build Developer Conference is coming: Is the "AI+PC" revolution here?

Microsoft's (MSFT.US) Build developer conference is set to kick off on Tuesday, giving the company an opportunity to showcase its latest artificial intelligence (AI) projects. Earlier this month, OpenAI and Google (GOOGL.US) held highly anticipated AI events.

In the field of AI competition, one area where Microsoft has a clear advantage over other companies is its ownership of the Windows operating system, which gives the company a large PC user base. Microsoft CEO Satya Nadella stated in January this year that 2024 will mark AI becoming a "first-class component of every personal computer."

The company has already introduced the Copilot chatbot assistant in the Bing search engine and offers paid services in the Office productivity software. Now, PC users will hear more about how AI will be integrated into Windows and what they can do on new AI-powered PCs.

A few days before Build, at Google's I/O conference, the search giant unveiled its most powerful AI model to date and demonstrated how its Gemini AI will operate on computers and smartphones. Prior to Google's event, OpenAI announced its new GPT-4o model. Microsoft is a major investor in OpenAI, and its Copilot technology is based on OpenAI's models.

For Microsoft, the challenge is twofold: maintaining a prominent position in the field of AI and boosting personal computer sales. After experiencing an upgrade cycle during the pandemic, PC sales have been sluggish over the past two years.

Morgan Stanley analyst Erik Woodring recently wrote in a report to investors about Dell (DELL.US) that he still "remains positive on the recovery of the personal computer market," citing customer feedback and recent "upward revisions to the product configurations of original design manufacturers (ODMs) for laptops."

Tech industry research firm Gartner estimates that after years of decline, PC shipments grew by 0.9% this quarter. Microsoft CFO Amy Hood stated last month during the company's quarterly earnings call that PC demand was "slightly better than expected." The new AI tools introduced by Microsoft may provide another reason for businesses and individual users to upgrade their old computers, whether they are produced by HP (HPQ.US), Dell, or Lenovo.

On April 26, the day after Microsoft announced its earnings report, Bernstein analysts wrote in a report to investors: "While Windows Copilot will not directly drive profits, we believe it should increase Windows usage, Windows stickiness, consumer preference for higher-priced, more powerful PCs (thus bringing Microsoft more revenue per device), and potential search revenue Although Microsoft will provide software to handle some artificial intelligence tasks sent to the internet, Microsoft's computers will use chips from AMD (AMD.US), Intel (INTC.US), and Qualcomm (QCOM.US) to perform offline artificial intelligence work. This may include, for example, using your voice to request Copilot to summarize a recording without a connection.

What is an artificial intelligence computer?

The key hardware of an artificial intelligence personal computer is the so-called Neural Processing Unit (NPU). NPUs surpass the capabilities of traditional Central Processing Units (CPUs) and are specifically designed for handling artificial intelligence tasks. Traditionally, they have been used by companies like Apple (AAPL.US) to enhance photos, videos, or voice recognition.

Microsoft has not yet disclosed the capabilities of artificial intelligence personal computers without an internet connection. However, Google's Pixel 8 Pro phone does not have a full-fledged computer processor, but it can utilize Gemini Nano artificial intelligence to summarize and transcribe recordings, suggest text replies, and more.

Computers equipped with Intel's latest Lunar Lake chip and dedicated NPU are expected to be launched by the end of 2024. Qualcomm's Snapdragon X Elite chip with NPU is set to be released in the middle of this year, while AMD's latest Ryzen Pro is expected to be launched sometime this quarter. Intel stated that these chips can enable functions such as "real-time language translation, automatic reasoning, and enhanced gaming environments."

Apple has been using NPUs for years, recently highlighting this in the new M4 chip in the iPad Pro. The M4 chip is expected to be introduced in the next generation of Mac computers later this year.

Windows on Arm (ARM.US)

Unlike Intel and AMD, Qualcomm provides chips based on the arm architecture. An upcoming Microsoft event will discuss "Windows on the next generation of Arm," potentially addressing how Windows runs on Qualcomm chips and how it differs from the Intel and AMD versions of Windows.

According to recent data from Canalys, Intel still holds 78% of the personal computer chip market share, with AMD following closely at 13%. In the past, Qualcomm has touted advantages such as longer battery life, thinner design, and cellular network connectivity when promoting computers based on Snapdragon arm processors. However, early versions of Qualcomm's chips were limited in the services provided to consumers. For example, in 2018, the company's Snapdragon 835 chip could not run most Windows applications.

Since then, Microsoft has made improvements to Windows to handle traditional applications on Arm, but challenges remain. The company even has a dedicated FAQ page for computers running on Arm hardware AI in Other Fields

Microsoft will also host conferences like "AI Everywhere" to discuss how to "accelerate the generation of artificial intelligence models" on devices running in the cloud. The "Azure AI Studio" conference will explore how developers can create their own Copilot chatbots, similar to what Google and OpenAI have done with Gemini and ChatGPT. Imagine, for example, a company creating a chatbot that can help employees choose health benefits