The
global
semiconductor
industry
is
set
for
a
“transformation”
—
thanks
to
artificial
intelligence
PCs
loaded
with
chips
developed
by
British
chip
designer
Arm
,
according
to
Morgan
Stanley.
That’s
because
more
powerful
PCs
are
needed
to
run
AI
applications.
Morgan
Stanley
noted
that
Microsoft
requires
new
AI
PCs
to
have
a
computing
capability
of
45
tera
operations
per
second
to
properly
run
its
Copilot
—
its
AI
tool
—
in
its
laptops.
“Running
generative
AI
apps
in
the
background
will
be
a
key
challenge
for
future
laptop
PCs’
battery
life
and
thermal
design,”
the
bank’s
analysts
wrote
in
a
May
7
report.
Arm-based
central
processing
units
are
known
for
energy
conservation
and
thermal
control,
which
lead
to
longer
battery
life
and
more
compact
designs,
Morgan
Stanley
noted,
adding
that
they
“exhibit
a
notable
edge
in
power
efficiency.”
The
bank
therefore
expects
Arm-based
AI
PCs
to
“start
a
transformation
that
will
affect
the
global
semis
industry.”
Currently,
normal
Windows
PCs
are
running
on
processors
such
as
those
made
by
Intel
,
AMD
and
Qualcomm
.
Morgan
Stanley
added
it
believes
that
Apple
may
expand
its
Arm-based
CPU
to
AI
servers
as
well.
The
bank
estimates
that
AI
PCs
will
reach
a
penetration
rate
of
95%
by
2027
—
up
from
8%
in
2024.
On
the
assumption
that
Nvidia
and
fabless
semiconductor
firm
MediaTek
takes
50%
market
share
in
Windows
on
Arm
(WOA)
PCs
in
2028,
total
shipments
of
WOA
PC
chips
should
reach
65
million
in
2028.
Shipments
for
such
chips
in
2024
are
at
2
million.
Windows
on
Arm
is
the
term
for
AI
PCs
working
on
Arm
chips.
Stocks
What
stocks
will
benefit
from
Arm’s
foray
into
AI
PCs?
Morgan
Stanley
named
TSMC
,
MediaTek
,
Nvidia
,
Qualcomm
,
Microsoft
and
Arm
itself.
It
said
PC
original
equipment
manufacturers
that
“commit
resources”
to
WOA
devices
should
benefit
as
well.
It
says
the
expected
partnership
between
Nvidia
and
Taiwan’s
MediaTek
to
launch
their
first
WOA
PC
CPU
chip
is
an
“interesting
story.”
Both
companies
are
already
in
a
partnership
to
develop
chips
and
software
for
automobiles.
It
raised
its
price
target
for
MediaTek
by
8%
to
1,388
New
Taiwan
dollars
($42.81),
implying
nearly
27%
upside.
As
for
TSMC,
Morgan
Stanley
says
its
foundry
market
share
with
the
“x86”
CPU
market
will
grow.
The
x86
is
a
widely
used
architecture
for
CPUs.
That’s
thanks
to
Intel’s
outsourcing
of
its
CPU
production
and
AMD’s
market
share
gain,
which
will
bode
well
for
TSMC,
given
that
it’s
AMD’s
major
foundry
partner.
“However,
TSMC’s
foundry
market
share
for
Arm-based
CPU
is
much
higher
than
that
for
x86,
as
Intel
still
produces
most
of
its
own
x86
CPU
products,”
Morgan
Stanley
said
.
“We
therefore
view
Arm’s
share
gain
over
x86-based
CPUs
as
positive
for
TSMC,
and
think
Arm
CPU
proliferation
could
bring
more
incremental
revenue
to
TSMC
than
x86
in
the
coming
years.”
The
bank
raised
its
price
target
for
TSMC
by
8%
to
NT$928,
representing
a
potential
16%
upside.
—
CNBC’s
Michael
Bloom
contributed
to
this
report.
