Personal computers (PCs) have been used as the major productivity device for several decades. But now we are entering a new era of PCs based on artificial intelligence (AI), thanks to the boom witnessed in generative AI (GenAI). We believe the inventory correction and demand weakness in the global PC market have already normalized, with the impacts from COVID-19 largely being factored in. All this has created a comparatively healthy backdrop for reshaping the PC industry. Counterpoint estimates that almost half a billion AI laptop PCs will be sold during the 2023-2027 period, with AI PCs reviving the replacement demand.

Counterpoint separates GenAI laptop PCs into three categories - AI basic laptop, AI-advanced laptop and AI-capable laptop - based on different levels of computational performance, corresponding use cases and the efficiency of computational performance. We believe AI basic laptops, which are already in the market, can perform basic AI tasks but not completely GenAI tasks and, starting this year, will be supplanted by more AI-advanced and AI-capable models with enough TOPS (tera operations per second) powered by NPU (neural processing unit) or GPU (graphics processing unit) to perform the advanced GenAI tasks really well.

During a January 31 Earnings Call, Cristiano Renno Amon (President and CEO of Qualcomm) discussed the upcoming launch of his company's Snapdragon X Elite processor—an ARM-based SoC that is built "for AI" on next generation tablets, notebooks and ultra-slim laptops. The twelve onboard custom Oryon cores are part of a package that will become (in marketing terms): "the most powerful, intelligent, and efficient processor ever created for Windows in its class. With cutting edge responsiveness, navigate demanding multi-tasking workloads across productivity, creativity, immersive entertainment, and more..." Amon and his executive colleagues are targeting a middle-of-2024 launch of Snapdragon X Elite-powered devices, he also mentioned a next-gen version of Microsoft's operating system in the same sentence: "We're tracking to the launch of products with this chipset tied with the next version of Microsoft Windows that has a lot of the Windows AI capabilities. We're still maintaining the same date, which is driven by Windows, which is mid-2024, getting ready for back-to-school."

The rumor mill has "Windows 12" marked down for a summer 2024 launch period—last December, Taiwan's Commercial Times reported on a number sources within the PC manufacturing industry—alluding to a June release date. Intel Chief Financial Officer Dave Zinsner relayed a similar schedule to a Citi interviewer (reported by PC Gamer): "We actually think '24 is going to be a pretty good year for client, in particular, because of the Windows refresh. And we still think that the installed base is pretty old and does require a refresh and we think next year may be the start of that, given the Windows catalyst. So we're optimistic about how things will play out beginning in '24."

According to the report by Windows Central, Microsoft is preparing a major update for Windows 11, codenamed Hudson Valley, which is expected to be released later this year as "version 24H2" or the 2024 Update. This update is anticipated to be a substantial upgrade from last year's version 23H2, featuring performance, security, quality-of-life updates, and new features. The star of the 24H2 update is going to be the focus of next-generation AI experiences, a concept Microsoft has hinted at over the past year. Rumors suggest the introduction of an advanced Copilot that will leverage AI and machine learning to enhance the Windows user experience for improved productivity across apps, search, and more. According to sources, Microsoft is aiming for a September release window for version 24H2, with plans to finalize the update over the summer. Despite speculation that this update might be called "Windows 12" due to its alignment with next-gen AI PCs and experiences, sources indicate that it will likely remain a significant Windows 11 update, especially following the departure of ex-Windows chief Panos Panay.

Microsoft is currently testing some of the features of this next release in the Insider Canary Channel, providing a glimpse into the new features. The update will enhance Snap Layouts with machine learning, suggesting commonly snapped apps for a more streamlined user experience. File Explorer will now support the creation of 7zip and TAR compressed archive files, and PNG files will support viewing and editing metadata. The Quick Settings panel will be updated, allowing users to scroll through all available settings and include a new refresh button for the Wi-Fi list. Phone Link will also see improvements, including using a linked phone as a webcam. A new "Energy Saver" mode will be introduced, reducing system performance and saving energy on battery-powered and plugged-in PCs. General improvements include a new "Install drivers" button during the Wi-Fi setup page, the removal of several built-in Windows apps from the OS image, and a new "Windows protected print mode" for Mopria-certified printers.

Microsoft today announced the introduction of a new Copilot key devoted to its AI assistant on Windows PC keyboards. The key will provide instant access to Microsoft's conversational Copilot feature, offering a ChatGPT-style AI bot right from a button press. The Copilot key represents the first significant Windows keyboard change in nearly 30 years since the addition of the Windows key itself in the 90s. Microsoft sees it as similarly transformative - making AI an integrated part of devices. The company expects broad adoption from PC manufacturers starting this spring. The Copilot key will likely substitute keys like menu or Office on standard layouts. While currently just launching Copilot, Microsoft could also enable combo presses in the future.

The physical keyboard button helps make AI feel native rather than an add-on, as Microsoft aggressively pushes Copilot into Windows 11 and Edge. The company declared its aim to make 2024 the "year of the AI PC", with Copilot as the entry point. Microsoft envisions AI eventually becoming seamlessly woven into computing through system, silicon, and hardware advances. The Copilot key may appear minor, but it signals that profound change is on the horizon. However, users will only embrace the vision if Copilot proves consistently beneficial rather than gimmicky. Microsoft is betting that injecting AI deeper into PCs will provide usefulness, justifying the disruption. With major OS and hardware partners already committed to adopting the Copilot key, Microsoft's AI-first computer vision is materializing rapidly. The button press that invokes Copilot may soon feel as natural as hitting the Windows key or spacebar. As we await the reported launch of Windows 12, we can expect deeper integration with Copilot to appear.

Microsoft Xbox Series X/S, their hardware refreshes, and variants, will reportedly be the company's mainstay all the way up until 2028, the company disclosed in its documents filed as part of its anti-trust lawsuit with the FTC. In a presentation slide titled "From "Zero Microsoft" to "Full Microsoft," the company explains how its next gen Xbox, scheduled for calendar year (CY) 2028, will see a full convergence of Microsoft co-developed hardware, software, and cloud compute services, into a powerful entertainment system. It elaborates on this in another slide, titled "Cohesive Hybrid Compute," where it states the company's vision to be the development of "a next generation hybrid game platform capable of leveraging the combined power of the client and cloud to deliver deeper immersion and entirely new classes of game experiences."

From the looks of it, Microsoft fully understands the creator economy that has been built over the gaming industry, and wants to develop its next-gen console to target exactly this—a single device from which people can play, stream, and create content from—something that's traditionally reserved for gaming desktop PCs. Game streamers playing on consoles usually have an entire creator PC setup handling the production and streaming side of things. Keeping this exact use-case in mind, Microsoft plans to "enable new levels of performance beyond the capabilities of the client hardware alone," by which it means that not only will the console rely on its own hardware—which could be jaw-dropping powerful as you'll see—but also leverage cloud compute services from Microsoft.

Microsoft announced that the world's most popular PC operating system, Windows 10, will attain EOS (end of support) on October 14, 2025. From that date forward, the company will no longer release regular security updates for the OS, or the so-called "patch-Tuesday" updates for Windows 10. This announcement only covers the client Windows 10 editions, and not Windows 10 Enterprise LTSC (long-term servicing channel), or special editions of Windows 10 for large organizations and government agencies. Organizations on the client editions, such as Windows 10 Pro, can avail the ESU (extended security update) program, which will give them access to critical security updates, but no new OS or software features. Microsoft took the opportunity to urge those on Windows 10 to upgrade to the latest Windows 11 operating system. The company plans to launch its next-generation Windows 12 some time in 2024.

AMD today announced the new Ryzen 8040 mobile processor series codenamed "Hawk Point." These chips are shipping to notebook manufacturers now, and the first notebooks powered by these should be available to consumers in Q1-2024. At the heart of this processor is a significantly faster neural processing unit (NPU), designed to accelerate AI applications that will become relevant next year, as Microsoft prepares to launch Windows 12, and software vendors make greater use of generative AI in consumer applications.

The Ryzen 8040 "Hawk Point" processor is almost identical in design and features to the Ryzen 7040 "Phoenix," except for a faster Ryzen AI NPU. While this is based on the same first-generation XDNA architecture, its NPU performance has been increased to 16 TOPS, compared to 10 TOPS of the NPU on the "Phoenix" silicon. AMD is taking a whole-of-silicon approach to AI acceleration, which includes not just the NPU, but also the "Zen 4" CPU cores that support the AVX-512 VNNI instruction set that's relevant to AI; and the iGPU based on the RDNA 3 graphics architecture, with each of its compute unit featuring two AI accelerators, components that make the SIMD cores crunch matrix math. The whole-of-silicon performance figures for "Phoenix" is 33 TOPS; while "Hawk Point" boasts of 39 TOPS. In benchmarks by AMD, "Hawk Point" is shown delivering a 40% improvement in vision models, and Llama 2, over the Ryzen 7040 "Phoenix" series.

Microsoft is preparing a big update for its Windows operating system. Currently at version 11, the company is gearing up for the launch of Windows 12, which is supposed to bring a monumental shift in the tectonic plates of the regular PC user experience. Enhanced by AI, the Windows 12 OS should utilize many features like generative AI, large language models, some GPT integration, and many other tools that could benefit AI, like photo editors. The confirmation for the Windows 12 launch coming in 2024 is sourced from the Taiwanese Commercial Times, which analyzed comments from Barry Lam, the founder and chairman of PC contract manufacturer Quanta, and Junsheng (Jason) Chen, the chairman and chief executive of Acer.

Both of them underscored the importance of AI and that AI PCs are coming with the next version of Windows. Supposedly, the launch date for Windows 12 is set for June 2024. In that timeframe, hardware vendors should roll out their SoCs embedding AI processing elements at every silicon block. Qualcomm is set to debut its Snapdragon Elite X SoCs in mid-2024, aligning with the alleged release schedule of Windows 12. With more players like NVIDIA, AMD, and others planning to utilize an Arm instruction set for their next-generation PC chips, we expect to see Windows 12 get full-fledged support for Arm ISA and treat it like a first-class citizen in the OS.

According to Tom's Hardware, Microsoft is busy hiring engineers to help the company design its own Arm based SoC for Windows 12. Based on job listings, Microsoft is adding people to its "Silicon team," which is currently involved in designing products for Microsoft's Azure, Xbox Surface and HoloLens products. That said, the specific job listings mentioned by Tom's Hardware mentions "optimizing Windows 12 for Silicon-ARM architecture" suggesting we're looking at a custom Arm SoC, with others mentioning "internally developed silicon components" and "building complex, state-of-the-art SOCs using leading silicon technology nodes and will collaborate closely with internal customers and partners."

That said, Microsoft is currently working with Qualcomm and the Microsoft SQ3 found in the Surface Pro 9 is the latest result of that partnership. This brings the question if Microsoft has decided to make its own chip to compete with the Apple M-series of silicon, or if Microsoft is simply looking at working closer with Qualcomm by hiring inhouse talent that can help tweak the Qualcomm silicon to better suit its needs. With Windows 12 scheduled for a 2024 release, it looks like we'll have to wait a while longer to find out what Microsoft is cooking up, but regardless of what it is, it looks like Windows on Arm isn't going anywhere.

Insider sources at Microsoft have spoken of continued efforts to modernize the core of its operating system, with the work-in-progress Windows 12 cited as the ideal candidate for substantial updates. The engineering team is reported to be integrating a modular design, which will allow for a reduced operating system footprint - similar in principle to ChromeOS. According to a Windows Report article the operating system development team is hard at work on a spiritual successor to the abandoned Windows Core OS project. Their newest effort is reported to be called "Windows CorePC" and Microsoft is aiming to hit the same goals it set for its Windows 10X edition, which was cancelled in mid-2021, but they will also target native support for legacy applications on devices that require necessary access.

Windows Core OS was shutdown after years of development and internal testing - it was hoped that a modular Universal Windows Platform-first (UWP-F) operating system would be more lightweight and gain stronger security features, as well as greater access to regular updates. The inside sources stated that Windows Core OS will not be developed any further, at least not for desktop computer purposes. The Microsoft team is anticipating that its new CorePC project will lead onto new configurations of Windows that feature a capability of scaling up and down depending on hardware variations. Windows PCs and devices, in some user case scenarios, do not require full breadth of legacy Win32 application support. CorePC will enable different configurations of Windows to be installed on a custom basis.

Microsoft is planning a speedy launch cycle for its next-generation Windows 12 operating system, with reports pointing to a 2024 release to market. This would give Windows 11 roughly 3 years as the company's latest client OS. It could use a major release like Windows 12 to significantly change the user interface, introduce support for newer types of hardware, as well as newer APIs. At this point, Windows 12 hasn't hit any of the public Insider release cycles, so there are no hints as to what direction the OS's development is headed.