On May 22, one day after the launch of AI PC with Microsoft and Qualcomm, Lenovo's share price rose sharply. As of the press release, Lenovo's share price rose by more than 13% to HK $11.6, a record high in the past two years, with a market value of HK $141.9 billion. Lenovo Holdings rose more than 10% to HK $6.8 today.
Today, Asustek Computer (2357. TW), another company that released AI PC, soared nearly 7% to NT $523 in intraday trading, with its share price hitting a record high and its market value reaching NT $387.7 billion.
On the news side, Morgan Stanley released a report this morning, saying that the increase of AI PC sales will benefit the supply chain. It raised Lenovo's target price by 64.8%, from HK $9.1 to HK $15, and its rating rose from the same level as the market to overweight.
Morgan Stanley concluded that the growth of AI PC and AI server will support the re rating of Lenovo stock. The report predicts that the penetration rate of AI PC in notebook computers will increase from about 2% this year to about 85% in 2028, which will help promote the unit price profit of PC OEMs. It is expected that Lenovo's AI PC revenue will increase from about 2% in 2024 to about 53% in 2028, which is the highest proportion of PC OEMs in the world, and the supply chain will also benefit.
In addition, in fiscal year 2023, Lenovo mainly launched L40S series of servers. The bank saw that orders for H100/H200 AI servers were increasing. It is expected that by the second half of fiscal year 2024, the contribution of these AI servers will become more important. In the coming quarters, the order size is expected to reach about $1.5-2 billion. This means that Lenovo's ISG (Infrastructure Solutions Business Group) revenue will grow by at least 20% in fiscal 2025 based on the new orders of AI servers.
A day ago, Microsoft just released its Windows 11 AI PC in the new campus of its US headquarters, claiming to reconstruct the entire PC form. Its built-in AI assistant Copilot used the GPT-4o model just launched by OpenAI last week, and launched a series of new Windows 11 AI PCs with Lenovo, Dell, Acer, Asus, HP and other partners. Lenovo Group launched the first next-generation Copilot+PC equipped with Qualcomm Snapdragon XElite - Lenovo YogaSlim7x and Lenovo ThinkPadT14sGen6. The starting prices of the two products are $1199 and $1699 respectively, and they will be launched in June 2024.
At the moment when the destocking of the PC industry is coming to an end and the growth track is returning, AI PC is particularly important for the overall drive of the PC industry. Yesterday, Luca Rossi, executive vice president of Lenovo Group and president of Intelligent Device Business Group (IDG), said, "With the beginning of the AI PC era, this is the turning point of the industry once in 30 years." Previously, Yang Yuanqing, chairman of Lenovo Group, revealed in an interview with First Finance that, with the help of AI, operating revenue will continue to grow in the new fiscal year, And have the opportunity to realize profit growth and profit margin improvement.
At present, there is no unified definition of AI PC in the industry. Some people think that as long as there is an NPU (neural network processing unit), it is AI PC, and some people think that it can use the big cloud model. Yang Yuanqing, Chairman of Lenovo Group, said in an interview with China Business News that AI PCs should have five characteristics: running AI agent agents that are compressed and performance optimized and interact naturally with users; It has stronger computing power and supports local heterogeneous computing power combined with CPU, GPU and NPU; Accommodates more personal life cycle data and forms a personal knowledge base; Open AI application ecology; Protect personal data and privacy security.
Canalys' latest research report points out that AI PCs will account for nearly one fifth (20%) of the PCs shipped in 2024. By 2027, thanks to energy conversion and new local experience, this proportion will rapidly increase to more than 60%, and will be applied to the commercial field on a large scale.
A Lenovo executive recently disclosed to China Business News that it is expected that by the end of this year, about 10% of the world's computers will be AI PCs, which is even higher in the Chinese market.
However, from the market point of view, AI PC has a high cost in chip computing and a large investment in software ecology, so the starting price of thousands of dollars is higher than that of ordinary computers. PC manufacturers still need to make efforts in technology innovation, cost control, ecological construction, user education, etc. At the same time, however, considering the high performance and unique AI functions provided by the product, industry insiders are expected to attract professional users or enterprises seeking the latest technology and efficiency to pay the bill first. Morgan Stanley predicts that AI PC will be popularized from notebook computers with a price of more than $1000, and eventually expand to the price range of $500.
In addition, for many PC industry chain manufacturers, AI PC is only the first step. How AI can reach and penetrate into all walks of life means a broader market space. Not long ago, Yang Yuanqing said in an interview with reporters that Lenovo's non PC revenue accounts for more than 40%. Not only PCs, but also AI will reshape all Lenovo businesses. From smart devices to infrastructure, to solutions and services, Lenovo hopes to find more market opportunities for AI applications.
