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5G Factor: AI, PCs, AI PCs

5G Factor: AI, PCs, AI PCs

In this episode of The 5G Factor, our series that focuses on all things 5G, the IoT, and the ecosystem as a whole, I’m joined by my colleague and fellow analyst, Olivier Blanchard, for a look at the top 5G developments and what’s going on that caught our eye including HP’s Q4 results hinting at PC market recovery, the impact of Intel’s Core Ultra debut on AI PC expansion, T-Mobile’s 5G secure laptop data plan push, and Qualcomm’s AI portfolio diversification gains from its Cloud AI 100 Ultra launch.

Our conversation focused on:

HP Q4 2023 Points to PC Market Rebound. HP’s FY Q4 2023 revenue of $13.8 billion signals the continuation of the trend toward market recovery. For starters, the figure builds on Q3’s $13.2 billion performance. Perhaps more important, however, Q4 revenue reflects only a 6.5% year-over-year drop compared with Q3’s 9.9% YoY shortfall. We assess how these numbers suggest that while persistent macroeconomic headwinds, inflationary pressures, and stubbornly slow-moving inventories are still acting as a drag on certain segments of the tech sector, and particularly hardware and device-focused businesses, that drag has been eroding steadily quarter after quarter. This helps underscore why 5G connected devices, including laptops, are due for an uptick in 2024.

Intel Core Ultra NPU Targets AI PCs. Intel’s new Core Ultra processors, code-named Meteor Lake, feature Intel’s first-ever integrated neural processing unit (NPU) for power-efficient AI acceleration and local inference on the PC. An increasing amount of the decision-making workload done by AI – generating an answer to a query, for example – is being carried out by devices like a PC or smartphone. We review why Intel’s Core Ultra move is well-timed, especially as more than 50% of enterprise-managed data will be created and processed outside the data center or cloud by 2025.

T-Mobile Shows 5G Secure Laptops Key to Security. T-Mobile is offering 5G data plans across its nationwide 5G standalone network. From our view, 5G laptops can maintain a continuous, secure, and high-speed connection wherever subscribers are, including distributed workforces, eliminating the need for Wi-Fi or hotspot dependencies, and reducing connectivity downtime. We explore how T-Mobile’s 5G wireless network helps 5G laptop subscribers browse the web with virtually no lag time as well as take a 5G laptop virtually anywhere with confidence their data is secure, especially as organization-wide security is a top-priority for businesses.

Qualcomm Diversifies AI Portfolio with Cloud AI 100 Ultra Debut. Qualcomm recently launched its Qualcomm Cloud AI 100 Ultra, a new member of its portfolio of cloud AI Inference cards, purpose-built for generative AI and large language models (LLMs). The Qualcomm Cloud AI 100 Ultra uses Qualcomm’s AI cores to deliver up to four times the performance of the previous generation — enabling improved performance for each total cost of ownership (TCO) dollar. We assess why the solution’s ability to support 100 billion parameter models on a single 150-watt card, 175 billion parameter models with two cards, and even larger models through multiple Qualcomm Cloud AI 100 Ultra cards using Qualcomm AI Stack and Cloud AI SDK, can broaden Qualcomm’s cloud AI presence. This is validated by HPE’s selecting the Qualcomm Cloud AI 100 Ultra for the HPE ProLiant DL380a Gen 11 server designed for accelerator-optimized generative AI workloads, including natural language processing (NLP).

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Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

Transcript:

Ron Westfall: Hello and welcome everyone to the 5G Factor. I’m Ron Westfall, Research Director here at The Futurum Group, and I’m joined here today by my distinguished colleague, Olivier Blanchard, who is our Research Director on key areas such as PCs and devices. Today, we’ll be honing in on the major 5G developments that have caught our eye. I think we’ve already gotten a bit of a teaser. It will be related to devices and PCs very likely. With that, Olivier, welcome back. It’s great to see you. How have you been bearing up between our episodes?

Olivier Blanchard: It’s always good to be back. I’ve been very well. As you can notice, I have a bit different background. I’m in the middle of a move, so every time that I’m on the show, there’ll be something new on the wall probably. So it’s going to keep evolving.

Ron Westfall: Well, it’s looking good. I’m a bit green with envy that you’re showing off a new look, basically. Dealing with Christmas decorations and all that good stuff in this neck of the woods. Hey, well with that, let’s jump right in. I think one thing that definitely caught our eye were the recent financial results by HP. Specifically, HP’s fiscal year Q4 2023 revenue came in at $13.3 billion, which from our perspective is signaling the continuation of a trend toward a broad market recovery. As foreground, that figure builds on Q3’s $13.2 billion performance. It’s also important to note that the Q4 revenues reflect only a 6.5% year-over-year drop compared with Q3’s 9.9% year-over-year shortfall. So clearly, there was tangible improvement. Now these numbers are suggesting that while persistent macroeconomic headwinds that we’re all familiar with are still out there alongside inflationary pressures and stubborn slow-moving inventories, particularly in this market segment, that they’re still acting as a drag, at least on specific segments such as PCs. So the tech sector as a result is reflecting that and particularly, when it comes to hardware and device-focused businesses. So what we want to look at now are the key growth areas, and that, I believe, is something that is indicating positive news on the horizon. Collectively, HP’s revenue grew 10% quarter-over-quarter and twice as fast than total revenue. So hopefully, that makes sense. With that, Olivier, from your view, what are the key takeaways from HP’s Q4 ’23 fiscal results? What are you seeing that’s important?

Olivier Blanchard: Well, I think there are two or three of them. So on the one hand, it’s funny to be excited about year-over-year shortfall, right?

Ron Westfall: Right. Ironic.

Olivier Blanchard: We’re still not out of the woods. So in case you haven’t been paying attention, the PC market has been… hit a rough patch last year and most of this year due to a number of different reasons. Some of the macroeconomics, some of them supply chain related, but also for the most part, there was a lot of over buying following COVID.

Ron Westfall: Yes.

Olivier Blanchard: So we’ve been dealing with bloated inventories for many quarters now, and so the industry is still working its way out of that. So what we’ve noticed over the course of the last two quarters is instead of continuously dropping quarter-over-quarter or just the demands being at very, very low levels, we’re starting to see it rise again. So even though year-over-year numbers look bad, sequentially, quarter-over-quarter, they keep improving. Although Dell’s earnings numbers for the last quarter showed that it leveled off in the quarter-

Ron Westfall: Okay.

Olivier Blanchard: … so I want to be a little bit bearish just a tad on the recovery.

Ron Westfall: Sure.

Olivier Blanchard: I think we’re going to get two steps forward, one step back kind of rhythm until we level off and year-over-year looks at zero. But anyway, so we’re in the midst of this recovery that’s very slow with PCs. Now with phones, it’s a totally different thing, and we’re going to talk about phones later. Mobile’s actually doing well. I think Apple had its best mobile quarter for iPhone yet.

Ron Westfall: Right.

Olivier Blanchard: Wowway’s coming back, so there’s a bunch of good stuff there. So it’s not tech in the hole, it’s just like this asymmetrical recovery and PC is lagging a little bit. Second thing I think that’s really important is HP is super well positioned to make the most out of this recovery. So on the one hand, one of the big growth drivers is anything AI related, and I think we’re going to see that continue well into 2024 and into 2025. So that’s AI- related services and it’s AI-related infrastructure, obviously data centers, etc, but also more and more AI on device. I think that we’ll be seeing some good AI PCs and other AI integrations in HP’s portfolio into the next year. Then the third thing is, I think, and it’s something that I didn’t write about in my coverage of HP earnings, it’s their acquisition of Poly.

Ron Westfall: Yes.

Olivier Blanchard: Yes.

Ron Westfall: Of course.

Olivier Blanchard: So as you know, Poly used to be Polycom. Actually, the camera that I’m using right now is Poly, and I have another one in the back. That little one right there in the front.

Ron Westfall: Product placement, I like it.

Olivier Blanchard: Yeah. I have headphones, I have all kinds of stuff from them. HP bought Poly, and what it does is it’s integrated the whole hybrid work ecosystem. So essentially-

Ron Westfall: Right.

Olivier Blanchard: … HP has the PCs. HP has the cameras. HP has the audio. HP has all of the accessories that allow workers like us to either work really well at the office or work really well at home or work really well on the road. I think that this merging, which is still ongoing, by the way, it’s not completely operationalized neatly yet, it’s still aches and pains. But watching HP and Poly merge together and blend their capabilities and all their devices together is creating a really good story for IT decision makers in the enterprise and also IT decision makers in the SMB long tail because it is like a one-stop shop. All of these UIs are becoming much more interconnected. So for instance, if you have an HP laptop and you have a Poly camera in the room, immediately, they’re going to discover each other. So there’s going to be a lot of affinities that generally we see in the Apple ecosystem that are essentially just developing in the HP ecosystem. I think that’s a really exciting story for the markets at a time when we’re still work from home-

Ron Westfall: Right. Yeah.

Olivier Blanchard: … but there’s a big push to work for at the office as well and ITDM’s and companies need solutions that are highly portable and adaptable and that don’t complicate things so you don’t have to have different sets of cameras for different applications so everything works from anywhere, and HP has that. So I think its success in the last quarter is indicative of a trend or a direction towards this that I don’t think any other PC OEM has. No matter how good their PCs are, no matter how good their solutions are, I don’t think that anybody has that complete of a hybrid workplace ecosystem as HP now.

Ron Westfall: Well, yeah, that’s, I think, impressive what’s going on at HP. To your point, Olivier, yes, the major players that had a heavy stake, that have a heavy stake in the PC market segment basically all experienced the same kind of issues. You mentioned Dell, also Lenovo. One thing that I think helped these companies in general is their portfolio diversification. That, I think, is a tribute to their decision-making for rainy days, such as what has happened with the PC market segment specifically. I think yes, HP’s acquisition of Poly does, I think, energize the HP messaging, and that’s not to say that they will continue to face tough competition. You touched on Apple, naturally, but also this is something that at the end of the day is good for the consumers out there, for the businesses out there, and so stay tuned. We’ll definitely be revisiting outcomes from the completion of the HP Poly deal and naturally looking forward to that. I think what you touched on in terms of the PC market definitely segue ways into our next key topic, and that is AI PCs.I think it’s important to note that this is something that HP has a stake in naturally and that we’ve saw just earlier this quarter when Intel at its Intel innovation event definitely put the spotlight on it in terms of delivering a new PC experience primarily through AI capabilities that are new and evolving through their upcoming Ultra Core processors also code named Meteor Lake. What I think is impressive about that, it features Intel’s first neural processing unit or NPU. This is something that is essential really, for accelerating AI-inferencing on devices, and that’s something that is, I think, clear about the future of AI. It’s going to be increasingly hybrid. That is, it’s not going to be primarily the data centers, but increasingly, not at the data center quite simply, on devices that we’ll see a lot more AI workload activity going on. In fact, I think a key takeaway from that event is that an increasing amount of the decision-making workloads done by AI, for example, generating an answer to a query is being carried out by devices like a PC or smartphone.

In fact, more than 50% of enterprise-managed data will be created and processed outside the data center or cloud by 2025. So I think that is a major trend that I know I’ll be paying attention to, that we’ll be paying attention to. With that, I think this is also an opportunity to talk about, okay, how is this impacting the 5G ecosystems specifically? I think one area that is definitely going to be benefiting from this is the connected laptop, specifically 5G-connected laptops naturally. We know that major CSPs, top tier mobile operators such as T-Mobile, are offering these capabilities. So this is an opportunity for us to delve down into what’s going on in this segment and why is it important. I think what we need to understand is that 5G laptops can maintain a continuous, secure and high-speed connection wherever the user is, and that would eliminate having to exclusively rely on Wi-Fi or hotspots. Also, that can also reduce downtime for any laptop user out there, especially if they’re on the road, if they’re in an environment such as an airport or wherever else where they’re not fully confident about the security capabilities there. We’ll talk more about that, certainly. But I also see that it also allows if a organization chooses to adopt 5G-connected laptops, that they definitely will have a more secure implementation. That is they can implement policies that are unified across basically their laptop fleet, and so that way, they can have confidence about the integrity of those devices. We’ve certainly seen the headlines when it comes to cybersecurity, ransomware attacks or just regular malware attacks and so forth have definitely disrupted companies, have definitely undermined their security, their brand and so forth. So I believe that 5G-connected laptops or connected laptops in general are going to be increasingly important and has helped organizations support the hybrid workforce you’ve touched on, Olivier. With that, what do you see about it, not only the T-Mobile connected laptop proposition, but about the trend here in the market? What do you think is important for us to understand?

Olivier Blanchard: I’ve always been a little bit perplexed as to why connected laptops haven’t been a thing yet. Really, at scale, it just makes sense. The whole concept of the laptop is to be portable. So you want to be able to unplug from a power source and have all day battery, at least all workday battery, but preferably longer, and you want to have connectivity. To me, only being connected to Wi-Fi is a half measure. It’s nice, but I want to be able to work wherever I am.

Ron Westfall: Exactly.

Olivier Blanchard: It’s not even an issue of whether or not there’s connectivity where I am, it just might be a bandwidth issue where there’s connectivity, but I’m in an airport or I’m in a hotel and there’s so many people on the network at the same time that my connectivity might as well not be there at all because everything’s just taken forever to buffer. With 5G and especially mmWave, you can get a lot more packets of information to you, it’s just faster, and you can get that scale at speed. So it’s been a no-brainer in terms of capabilities. Everybody wants laptops to be able to last all day and to connect from anywhere and not have lag because we all want to be productive. The people we work for and that we’re responsible to also want us to be productive. So it’s been a strange thing. Now, I know that Qualcomm has been working on this for some time. They came out with the 5G PCs-

Ron Westfall: Yeah, that’s right.

Olivier Blanchard: … and the connected PCs, and it’s been a struggle. Even though they have all of the hardware that they need, they have the antennas, they have the solutions, they can make it work, PC OEMs have pushed back a little bit on that for pricing reasons, and there might be some channel friction there. But also, part of it is the operators haven’t necessarily been proactive in trying to push this either. So it’s been this strange standoff between the OEMs and the carriers to see who’s going to make the investment first or who’s going to come out with a solution that makes sense where you don’t have to necessarily have a different plan or where it’s not complicated or just overly expensive? So it’s nice to finally be here. I think that 5G laptops and AI laptops are a really good combination, although there’s a little bit of, I think there’s a paradox there. So the point of having AI PCs where you don’t need to be connected to the cloud to run your inference and to run your LLMs and everything else that you’re going to do with your extremely powerful on-device AI and capabilities. But at the same time, we’re trying to build these laptops so that they have 5G connectivity as well so that you’re hopefully never going to be disconnected and never going to have lag issues. So it’s interesting to see how things are angling themselves, but I think it’s just an natural evolution of the laptop. I’m glad that carriers are beginning to be on board, and I’m not surprised that T-Mobile is taking the lead on that a little bit because they do tend, not necessarily to be the first to market with things, but to be a little bit more intellectually curious to market test different ideas. That’s just part of their culture is just to innovate more and take chances where some of the other carriers might want to wait and see or just don’t see the benefit yet. If T-Mobile sees a niche where they can get into and just get some beachhead and get a really deep penetration, even with a very narrow segment of users, they’re going to do that.

Ron Westfall: Yeah, I think that is very pertinent to what is different now. I think those are fair observations. Why hasn’t this market been more prevalent given some of the built-in advantages? I think to your point about T-Mobile for business is that, yeah, I think there is more support in the ecosystem. Intel is also another player that’s definitely supporting how to make connected laptops more attractive to businesses, to enterprises. I think what is important is that T-Mobile has the first nationwide 5G standalone network. So I think that’s going to be a difference maker that these are really genuine 5G laptops that are being built by the OEMs, naturally the Lenovos, but also the HPs, Dells and so forth. So these offerings are out there, however, the catalyst is going to be, not just that 5G networks themselves are going to be improved, but circling back to that security issue and some of the other benefits. For example, with Intel vPro organizations can definitely get fleet benefits that you’re not going to get by bringing your own devices, for example, and that includes policy implementations. But ask any organization that has had a nasty cybersecurity situation because a worker’s laptop at a Wi-Fi hotspot was compromised. Now you’re going to see, “Well, we’ve got to really improve upon this.” This I think is going to be increasingly opening up why 5G laptop connectivity. With that, to your point also about, well, what about on-device AI inferencing and so forth? Well, I believe that it can be both because in addition to AI, there are all these other regular enterprise applications that need to be supported on the laptop, and some of them will benefit from AI directly. Some of them don’t necessarily need AI. So I think it’s just really, it’s a question of how to combine both on the same device. With that, I think that’s a great segue way into talking about specifically how are devices going to optimize AI processing? To your point about Qualcomm, they had recently launched the Qualcomm Cloud AI 100 Ultra, which is a new member of its portfolio of cloud AI inference cards.

They are purpose-built naturally for generative AI and large language models, which we all reference as LLMs. What I think is useful to know is that they’re using Qualcomm’s AI cores to deliver up to four times the performance of the previous generation. So that’s impressive in itself, but it’s also enabling improved performance for each total cost of ownership dollars. So it’s this really, really bringing in the value aspect here. To underline that, it can support 100 billion parameter models on a single 150-watt card plus 175 billion parameter models with two cards and even larger models through multiple Qualcomm cloud AI 100 Ultra Cards using the Qualcomm AI stack and cloud AI software development kit. So this is really about this is hybrid AI. Yes, the on-device aspect is important, but also it’s syncing it up and optimizing it with naturally cloud processing. With that, from your perspective, what is it that Qualcomm is doing that is going to make a huge difference in how the AI landscape evolves and that it benefits basically all of us?

Olivier Blanchard: Right. Well, I think the biggest thing that you’ve mentioned there is diversification. One of Qualcomm’s, I wouldn’t say superpowers, but definitely, its capabilities strategically is to diversify. So we’ve seen them go from essentially just 3G, 4G, 5G. We’ve seen them dominate in phones and then move into other areas like the IoT, like sounds. Obviously, they’re in pretty much every XR, VR, AR headsets at this point. They’re in cars now, they’re doing super well. Network and data center has always been one of those spaces where even though Qualcomm is a chip maker and they know silicon so well, they haven’t necessarily had the footprint that they could have had simply because they focused on smaller and different kind of edge applications. But they’ve had pretty solid solutions, they’ve just flown under the radar a little bit or they’ve been very specific. But I think the opportunity here for Qualcomm is that on the one hand, they’re very good at AI, and they’ve been good at on-device AI for a very long time. I remember thinking to myself a few years ago that Qualcomm was an AI company before AI got big. I talked to some Qualcomm execs about this, and they just looked at me weird, and they’re like, “Yeah, I guess you’re right,” and they weren’t really thinking about themselves as such. I think that now it is definitely in the forefronts of their strategy. But the other thing that Qualcomm is really good at isn’t so much just the performance, it’s the performance per watt. I think what they bring to this equation, so in terms of the cost of ownership, I look at it through a different lens, or not a different lens, but an additional lens, I guess. It’s that the power efficiency of their silicon is almost second to none.

Ron Westfall: Yes.

Olivier Blanchard: So one of the big issues, one of the big challenges for data centers in general, but especially when it comes to very thermally expensive processes like inference and training models is you want to be as power efficient as possible, not just to keep the heat or the thermal envelope as low as possible, but also to just cut costs of running your data center, which requires a lot of energy. So every time that you can use chipsets or systems or systems on chip that are extremely energy efficient and smart about energy efficiency, that’s going to be a benefit, even if they’re not necessarily the biggest and the best chip to do a particular job. They might be the one that’s the best for the power efficiency and best per watt. I think that’s probably where Qualcomm can differentiate itself from competitors in the market as it has pretty much in every other segment that they’ve conquered or definitely been very strong in.

Ron Westfall: Yeah, I agree. In fact, to your point, Olivier, already, Qualcomm has recruited HPE to support the new cloud AI 100 Ultra chipset specifically on their ProLiant DL380a Gen 11 server, which naturally is designed for just that, accelerating generative AI workloads, including natural language processing, which I think is still dominating the headlines in terms of why AI across society, but certainly in the workplace.

Olivier Blanchard: Yep.

Ron Westfall: I think we definitely touched on three key areas that we’re going to have to revisit. So stay tuned, folks. More sequels, obviously, we’re going to talk more about the outcomes of the HP-Poly deal. Also, I believe there are some hot key data points that need to be emphasized about why connected laptops, specifically, 5G-connected laptops, so stay tuned on that.

Olivier Blanchard: Yep.

Ron Westfall: Naturally, we’re going to be talking a great deal more about hybrid AI, AI, not only on devices, but also at data centers at the edge, basically wherever needed. With that, thank you so much, Olivier, for joining today’s webcast.

Olivier Blanchard: Thank you for having me. As always, it’s always a pleasure.

Ron Westfall: Naturally. Well, we’re already here set up for the sequel on this particular set of topics. With that, thank you everyone for tuning in. Be sure to earmark us in terms of the Futurum Tech Webcast series, specifically 5G Factor on the Futurum Group website. On that note, good 5G day, everyone.

Other insights from The Futurum Group:

HP Q4 2023 Earnings Point to Market Recovery for the PC Segment

T-Mobile Q3 2023: Industry Pacesetter for Revenue and Customer Growth

Qualcomm Q4 2023 Earnings Reflect Start of Device Market Recovery

Author Information

Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.

He is a recognized authority at tracking the evolution of and identifying the key disruptive trends within the service enablement ecosystem, including a wide range of topics across software and services, infrastructure, 5G communications, Internet of Things (IoT), Artificial Intelligence (AI), analytics, security, cloud computing, revenue management, and regulatory issues.

Prior to his work with The Futurum Group, Ron worked with GlobalData Technology creating syndicated and custom research across a wide variety of technical fields. His work with Current Analysis focused on the broadband and service provider infrastructure markets.

Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.

Olivier Blanchard has extensive experience managing product innovation, technology adoption, digital integration, and change management for industry leaders in the B2B, B2C, B2G sectors, and the IT channel. His passion is helping decision-makers and their organizations understand the many risks and opportunities of technology-driven disruption, and leverage innovation to build stronger, better, more competitive companies.  Read Full Bio.

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