Microsoft's AI PC unveiling could benefit these chip stocks

By Emily Bary

Latest announcements look positive for Arm and Micron, but more neutral for AMD and Intel, according to BofA

Microsoft Corp.'s Copilot-enabled personal computers bode well for several notable chip stocks, BofA analysts say.

The technology giant on Monday unveiled Copilot+ PCs, which are computers that bake artificial intelligence into the device.

"While AI use cases at the edge to date have generally been limited to rudimentary functions such as video processing and background blurring, we highlight that Microsoft's new Copilot+ PC represents the first major breakthrough in offering new use cases," BofA Securities analysts led by Vivek Arya wrote late Monday.

Those functions from Microsoft (MSFT) include a "photographic memory" of user patterns and live captions with instant translations, he noted.

See more: Microsoft's AI chatbot will have 'photographic memory' of everything you do on a PC

And some chip companies stand to benefit from the growth of on-device AI features. One of them is chip designer Arm Holdings PLC (ARM), according to Arya and his team.

"Microsoft claims their new Copilot+ PCs are 58% faster than current ARM-based MacBook Air and vastly more power efficient than Intel/AMD-based PCs," the analysts wrote. "While next iterations of Intel/AMD processors should catch up in AI/NPU [neural processing unit] performance, we flag increased competition for PC [central processing units] overall."

The BofA team anticipates that Arm will make strides in this market, with its unit share going up to perhaps 12% in calendar 2026 from 2% in calendar 2020. Those share gains would come at the expense of incumbents Advanced Micro Devices Inc. (AMD) and Intel Corp. (INTC)

The announcements look "neutral" for AMD and Intel, as those companies could lose market share but benefit from pricing upticks, the analysts said.

Opinion: Intel has big plans for AI-capable PCs, but that may take time to catch on

They flagged Micron Technology Inc. (MU) as another prospective winner given that memory in general looks to be an "underappreciated beneficiary" of this trend.

"Larger AI models imply greater processing, larger (in size), faster (bandwidth) and more power-efficient (higher [average-selling-price) memory [specifications]," the analysts said.

For those reasons, memory players look like a "unique beneficiary of both core (HBM) and edge device AI upgrades," they wrote, referring to high-bandwidth memory.

See more: Micron's stock rises as Morgan Stanley admits its bearish stance 'was a mistake'

-Emily Bary

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05-21-24 1143ET

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