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AI is about to significantly change your computer: HP CEO

HP Inc. (HPQ) CEO Enrique Lores says consumers and businesses are poised to see big changes to their computers within 24 months due to new advances in artificial intelligence.

"What we are working on is to build AI capabilities into the PC," Lores told analysts on a late Tuesday earnings call. "So, consumers or professionals will be able to run AI applications at the edge and will not have to run them on the cloud."

"The benefit this will bring is that if you're a small company and you want to use some of your private data in an AI application, you will not have to upload it, you will be able to run it locally. And also there will be advantages in cost and advantages in latency," he said.

Lores added HP is working closely with chipmakers to integrate to new AI designs into its computers.

The efforts will be evident soon, Lores said.

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"There's going to be a significant change. Customers will start seeing some of these solutions available in 2024 about 12 months, 20 months from now, and it's going to be a huge opportunity to really bring energy to the category," Lores explained.

A heavy dose of energy is badly needed in the computing market.

HP saw unit sales under pressure in its PC and printing segments in the most recent quarter as businesses and consumers continued to closely manage their finances after the pandemic.

Fiscal second quarter net sales plunged 21.7% from the prior year to $12.9 billion, just shy of estimates for $13.03 billion. Sales in the personal systems (PCs) segment tanked 29% from the year-ago period, missing analyst estimates by about $200 million. Printing sales fell 5% year over year.

With HP's various cost-cutting efforts over the past year, margins in both businesses managed to stay intact.

HP shares dipped by about 5% in pre-market trading on Wednesday as investors locked in on the unit declines in PCs amid a softening economy.

But going somewhat overlooked is the potential for the first half of 2023 to mark the bottom for PC makers like HP.

PALO ALTO, CALIFORNIA - NOVEMBER 23: A sign is posted in front of a Hewlett Packard (HP) office on November 23, 2022 in Palo Alto, California. HP has announced plans to lay off 12 percent of its workforce as computer sales continue to decline. (Photo by Justin Sullivan/Getty Images)
PALO ALTO, CALIFORNIA - NOVEMBER 23: A sign is posted in front of a Hewlett Packard (HP) office on November 23, 2022 in Palo Alto, California. (Photo by Justin Sullivan/Getty Images) (Justin Sullivan via Getty Images)

Amid the rise in AI, consumers and businesses will likely need to refresh their pandemic-era computers to stay competitive.

US PC shipments in the fourth quarter of 2023 are expected to grow 6% year on year, according to new data from industry researcher Canalys. Full-year shipments in 2024 are forecasted to be 13% higher than in 2023.

Wall Street sees this refresh cycle as an inevitable earnings tailwind for HP.

"We view management’s commentary on the earnings call around much lower inventory levels to work down as well as a seasonal rebound in PC volumes led by consumer demand as largely in line with our own checks, and expect the seasonal upside to follow as long as there is no further deterioration in the macro- economy," said JP Morgan analyst Samik Chatterjee in a research note.

Chatterjee added: "Further driving our confidence in the volume projections are the higher installed base of PC volumes and robust replacement cycle with priority given to high-end features on PCs."

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email brian.sozzi@yahoofinance.com

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