Microsoft AI PCs are a ‘game changer’: Analyst

At its Build conference this week, Microsoft (MSFT) announced Copilot+ PCs, which are designed to integrate artificial intelligence capabilities on its computers. RBC Capital Markets Software Equity Analyst Rishi Jaluria and Macquarie Head of US AI & Software Research Frederick Havemeyer join Market Domination to discuss the company’s latest AI play.

“I think the introduction of these AI PCs is actually going to be a really big game changer to getting generative AI in the hands of every knowledge worker out there,” Jaluria explains. He adds that users will be able to use these small and medium language models locally, generating more AI use for general purposes. When it comes to large language models, Havemeyer says, “It’s very clear to us that the technology of a generative AI model of large language models is something that will find fit with consumers over time. ChatGPT did, and I think that with the right interface and the right platform, we’ll find it over time.”

AI is seeping into all sectors as companies seek to innovate and find efficiencies. “80% of CIOs are telling us that they are either currently in production or expect to be in production with AI over the next 12 months, so the appetite is real, the use cases are real,” Jaluria explains, adding that there is still a lot of room for the technology to grow.

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This post was written by Melanie Riehl

Video Transcript

Microsoft is going all in on A I.

The company this week announced a new category of P CS called Copilot plus their computers equipped with so called A I PC chips and will now run on open A is GP T +40 model.

So as software technology continues to advance, we’re looking at how to navigate the big picture and the best ways to position your portfolio with the Yahoo Finance playbook.

Let’s welcome in Rishi Juria R BC Capital Market, software equity analyst, as well as Frederick Havemeyer, the head of USA I and software research at Macquarie.

Gentlemen.

Thank you so much for being here, I guess let’s start first of all with the Microsoft announcement itself and sort of how we should think about it as investors, how big of a deal it will be, how incrementally um it will add to revenue, etcetera, R. I’ll start with you.

Yeah, absolutely.

And thanks so much for having us.

We were just out in Seattle at Microsoft build this week and look, I think the introduction of these A I PC is actually going to be a really big game changer to getting generative A I in the hands of every knowledge worker out there.

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Right.

Recall when you use any sort of GP T system today, it requires a fast internet connection, a lot of computing power.

Now, you know, it’s going, it’s going to take time to, you know, they get light enough that, that everyone can use them, but you’ll be able to use some of these more small language and medium language models locally without a superfast internet connection.

And so that I think will enable a lot more kind of general purpose.

Uh A I use cases and workloads that previously didn’t exist.

So I do think this is a very exciting announcement for Microsoft, Fred.

Let’s bring you in here as well.

Same question Fred.

So you know your reaction to that Microsoft event, you know, Rishi says these new A IP CS game changer, Fred, do you agree?

So for the past year, we’ve been making the call consistently that A I is going to have to move to the edge, it’s gonna have to move to the device.

And in many cases, this does require hardware like what Microsoft is rolling out to do it.

And it’s what would get us excited both about making this successful to consumers and knowledge workers, plus also being able to drive uptake of A I in a profitable way.

Because if you recall, I think one of the last time I was on Yahoo Finance, we had great time talking about what smaller language models mean large language models still quite large but nevertheless, smaller mean to uh margins.

And as we found we explored in the past, we think that achieving uh 80% to 90% plus gross margins with running generative A I models can be done by using small language models on specialized hardware or on local devices.

So I think quite exciting, Fred just follow up on that, you wrote a recent note about how consumers are gonna determine the impact here.

And I keep trying to figure out if where we are in the A I cycle is still um push or if it’s starting to be pull.

In other words, like all this stuff is coming out are are customers particularly on the retail side asking for this or these companies still at the face where they have to convince them that they want it.

I think that when we look at products out there like chat G BT, I think we already see that there are north of 100 million users that I would qualify in many cases as consumers really interested in these types of products.

Now commercializing it and making it something that’s useful and interesting for consumers.

I do think that there are technologies out there that have been perhaps what you describe as a solution in search of a problem.

And at the same time, I do think that it’s very clear to us that the technology of generative A I model of large language models is something that we find fit with consumers over time.

Chat GP T did.

And I think that with the right interface and the right uh platform, we’ll find it over time.

I mean, I’m a user of meta’s Rayban glasses, not here to discuss meta but just the glasses.

They’re fascinating.

They’re really good and I really enjoy having this like modality of working with, with these A I models sitting right in my glasses.

So we’ll see over time.

Richie.

Same question.

I mean, when you look across uh your, your coverage universe, Richie, what, what kind of customer adoption and engagement are you seeing when it comes to, you know, these new A I products and features?

Yeah.

Um A absolutely.

And I’m glad you have me alongside Fred because I, I definitely agree with him on a lot of what he’s saying.

Uh Look the, the, what what I would say is when we’re talking to companies, we’re talking to Cio S CTO S heads of it.

There is real appetite for A I usage within the enterprise.

Um A lot of this, I would say maybe 70% of it is actually net new budget.

So it’s not even cannibalizing other parts of it.

It’s coming out from other parts of the organization.

Um So there’s real money being earmarked.

Uh We’re, we’re, we’re seeing uh I’d say 80% of Cio S are telling us that they are either currently in production or expect to be in production with A I over the next 12 months.

So the appetite is real.

The use cases are real.

And remember we’re still at very, very early stages of this.

If I draw the analogy to the internet stages, you know, even though GP T 40 is incredibly powerful, this is probably 14 4 dial up level, right?

We haven’t even reached the high speed broadband.

So I think there’s still a lot more way for the technology to advance from here, but already seeing real interest from the enterprise and from consumers as well.