Microsoft’s latest AI announcements highlight a key upcoming catalyst for the tech mega-cap and four other portfolio names: the hardware refresh cycle. During his keynote speech at Microsoft’s Build last week, CEO Satya Nadella touted the company’s new AI-integrated computers. The upcoming CoPilot+ PCs, scheduled to launch next month by Microsoft and other personal computer makers, are powered by advanced chips. They can handle more AI tasks on the device without requiring a data connection to the cloud. It’s been a busy time for AI developments. Two weeks ago, Alphabet’s Google held its I/O developers conference and revealed several generative AI offerings, including more search and chat features. At its annual Worldwide Developers Conference next month, Apple is believed to share more information about an expected iPhone with built-in AI. Jim Cramer said new AI capabilities on and for devices will pave the way for the “largest refresh cycle in history.” It took a long time to arrive. Computers have been in a post-Covid slump since people returned to the office, at least part-time, and didn’t need to outfit their home offices at the same frenetic pace as during the pandemic lockdowns. Smartphone makers are waiting even longer for their refresh supercycle. Given the AI tailwinds, Microsoft, Apple, Broadcom, Nvidia, and Best Buy all stand to gain from what is expected to be an AI-driven rush to upgrade hardware. 1. PC Microsoft CoPilot+ MSFT Year-To-Date Microsoft (MSFT) Cumulative Performance Microsoft’s rollout of PC CoPilot+ will encourage users to upgrade their devices, boosting revenue for the company’s More Personal Computing division company, which takes into account sales of hardware peripherals and constitutes approximately 25% of overall revenue. During last month’s earnings conference call, management said the Windows OEM (original equipment manufacturing) segment, which includes revenue from Microsoft licensing software for Windows, benefited from strong demand. increased PC. Windows OEM revenue increased 11% year over year. This marks the third consecutive quarter of growth as PC volumes return to pre-pandemic levels. 2. Apple iPhones and Macs AAPL Year-to-date performance of Apple (AAPL) A refresh cycle would do wonders to ease a major concern of Apple shareholders: the slowdown of demand for the iPhone. The company faces increasingly tough smartphone competition in its second-largest market, China, as its local rivals grab market share. CEO Tim Cook hinted at upcoming AI features in Apple’s flagship device, which the Club said would entice customers to trade in their devices. Indeed, Apple has a loyal customer base thanks to its quality products and its highly integrated closed ecosystem. Shareholders received encouraging news about the iPhone on Tuesday. iPhone shipments in China jumped 52% in April, according to data from the China Academy of Information and Communications Technology. Jim said: “The direction is correct, but it’s just way too big a move.” He warned investors not to read too much into these so-called channel controls because they are volatile and often wrong. He cited concerns ahead of Apple’s results earlier this month that sales in China turned out to be far from what was feared. There are also signs that Apple is preparing new Mac laptops with AI-focused M4 chips. Although the news has not been confirmed directly by management, an integration of this could boost sales in Apple’s Personal Computing segment as customers flock to the latest model. PCs play a much smaller role in Apple’s overall results than the iPhone, but more Mac users will increase Apple’s high-margin services revenue overall, which we see as a driver of key growth for “own it, don’t trade it” club. ” action. 3. Broadcom Wireless, Networking AVGO Broadcom’s (AVGO) Year-To-Date Performance Broadcom’s Semiconductor division will see a boost from the refresh cycle across its Wireless and Networking segments, which account for 27% and 45% of the division’s revenue is expected to benefit from the expected increase in iPhone sales, as Apple is one of Broadcom’s largest customers supplying connectivity chips for the device. Apple flagship. More iPhones sold would raise all boats for component makers Broadcom’s wireless segment could certainly use a boost after posting a 4% year-over-year decline. other in the company’s latest reported quarter Broadcom’s network revenues benefit from the implementation of artificial intelligence IT infrastructure We saw this in the quarterly figures, with network sales having. jumped 46% on an annual basis. Next month, Broadcom will be the latest club name to release its results for this results season. 4. Nvidia Gaming, NVDA Visualization Nvidia Mountain (NVDA) Year-to-Date Performance The refresh cycle will also play a role in Nvidia’s overall revenue growth. If there were an increase in PC sales, in particular, that could boost both Nvidia’s gaming and professional visualization segments. Gaming PCs use Nvidia’s graphics processing units (GPUs) to accomplish compute-intensive tasks. As part of its stellar first-quarter results last week, management said gaming revenue jumped 18% on a year-over-year basis and professional visualization jumped 45%. Certainly, Nvidia’s data center business represents the majority of the company’s revenue, but the Club welcomes any growth, even incremental, in other areas of the AI chip powerhouse’s business. 5. Best Buy Store, Online Traffic BBY YTD mountain Best Buy (BBY) year-to-date performance The refresh cycle is one of the main reasons why the Club first initiated a position in Best Buy in March. PCs make up one of the electronics retailer’s main product lines. As Microsoft rolls out its AI personal computers, alongside peers like HP Inc. and Dell, more customers will enter stores and browse online to find the latest laptops. This is a crucial part of Best Buy’s turnaround, as the company reported its ninth consecutive quarter of negative comparable sales in February. The underperformance weighed on stocks. Jim recognized that the Club was getting into Best Buy early – fearing that once the PC refresh was installed, we would be priced out of the stock. (Jim Cramer’s Charitable Trust is long NVDA, MSFT, AVGO, BBY, AAPL, GOOGL. See here for a complete list of stocks.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim Cramer. made an exchange. Jim waits 45 minutes after a trade alert is sent before buying or selling a stock in his charity’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY OBLIGATION EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
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from Microsoft The latest AI announcements highlight a key upcoming catalyst for the tech mega-cap and four other portfolio names: the hardware refresh cycle.
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