Please tell us Reg: Why AI PC sales are slower than expected

World War Fee PC makers were salivating at the prospect of AI notebooks driving up their margins yet it seems the price difference coupled with a lack of killer apps and the destabilizing influence of tariff talk means customer adoption is slower than expected.

the commercial segment in particular is still figuring out what AI overall can do for them, what apps are relevant, how exactly they can benefit but also what they are actually allowed to use when it comes to security

To some extent, Lenovo, HP, Dell, and the other major brands are forcing the situation by driving more and more of these machines into sales channels, meaning PC buyers will find it harder to avoid buying so-called AI devices (hardware that integrates an NPU). Two in five notebooks sold via distribution in early Q2 were AI PCs, according to Context.

Marie-Christine Pygott, senior analyst for Personal Systems at Context, told The Register that "demand is pretty slow" due to a combination of reasons.

"The biggest issue is still the lack of a killer app or software that justifies the investment," she said. "Linked to that is the fact that the commercial segment in particular is still figuring out what AI overall can do for them, what apps are relevant, how exactly they can benefit but also what they are actually allowed to use when it comes to security, so it is still pretty early days for the whole AI topic."

The "next issue" pertains to the "slow economic recovery we have seen across most European markets, exacerbated by tariff uncertainty," said Pygott.

"We are hearing that a lot of smaller organizations in particular are cautious with spending in light of increased uncertainty. Plus, things in the AI PC segment are changing very quickly, so we are told some organizations have decided to wait until things become clearer and prices go down before investing in an AI PC."

Directions on Microsoft previously warned the incoming wave of AI meant buying a PC was riskier as there is no current standard for the software to work with.

It is certainly true that the tech "industry has been distracted with the trade war lately," Bryan Ma, IDC Vice President of Client Devices, stated last week following his visit to the Computex trade show in Taiwan.

"Indeed, many of my conversations this year have led with a tariff discussion rather than AI PCs. We think that AI PC adoption will hit some speedbumps due to the volatility around tariffs, especially if buyers are under pressure to buy cheaper products in light of economic uncertainty."

He added: "The lack of big use cases does makes one further wonder whether the momentum around AI PCs has stalled." Even Microsoft boss Satya Nadella has admitted this.

Gartner told The Register in late 2024 that price was going to be the soft underbelly of AI PCs and forecast a drop amid customer reluctance to spend more on kit without an obvious reason to do so.

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"Now the internal environment (tariffs and increased pricing) together with the external environment (economic outlook, exchange rates etc) is creating unprecedented uncertainty," Ranjit Atwal, research director told us today.

He said some procurement heads in corporate enterprises are effectively hitting the pause button on purchasing PCs. "That will have a significant impact on AI PC buying, which is an upsell."

Despite all the barriers, Pygott at Context says the adoption of AI PCs is gradually going up, "driven largely by next-gen product rollouts and the fact that an increasing number of products now come standard with an NPU."

Microsoft, for example, is heavily leaning on the 13,000 + third party suppliers to get behind Copilot and Copilot + PCs, while Lenovo, HP and Dell promote their own AI machines.

On a recent earnings call, Dell COO Jeff Clarke said: "While the PC refresh remains behind prior cycles, we are seeing indicators that the installed base is upgrading to new Windows 11 PCs, many of them AI PCs."

HP CEO Enrique Lores also put his best foot forward on a recent conference call to discuss its latest financial results, saying "we are very pleased with the progress" the company is making with its systems, with the sales mix of AI PCs expected to be 25 percent by the end of the year.

"In terms of key applications, what we have seen is a large number of software companies introducing solutions that utilize the capabilities of AI PC. We have more than 100 ISVs supporting that now… this is why we think that the penetration is going to continue to grow."

Lores said the devices are around 10 to 20 percent higher priced than "regular PCs," and HP thinks the form factor will account for 50 percent of its portfolio in two years.

Lenovo is planning to launch agentic AI worldwide in the coming quarters, Luca Rossi, President of Lenovo's Intelligent Devices Group, said on a conference call to discuss its financial results last month. One of the features, according to Lenovo, is Action Assistant, which automates multi-step tasks by "transforming natural language into actionable steps, streamlining workflows for professionals."

The devices will have "features that we believe over time will wow customers," said Rossi.

The only thing that seems be causing this level of surprise at present in the price tag of AI PCs from all the major vendors.

Pygott told us:

"The average price for a traditional notebook in Europe in early Q2 was €500 vs. €1,000 for an AI-capable notebook.

"Please note that this is an average, so the non-AI will also include very low end products like education notebooks, for example. If we look at purely NPU vs. non-NPU based products, my estimate is that the price difference would be around 15 percent."

For customers moving fleets of existing PCs off Windows 10, that may be a bridge too far and they may decide to pay Microsoft the extra support costs. Beancounters at companies yet to migrate are no doubt already counting the beans. ®