The Microsoft Build Conference was held to promote AI PCs and end-side AI. On May 21, Microsoft held the 2024 Build Conference. At the special event the day before, Microsoft officially launched a Windows 11 AI PC designed specifically for the AI experience. This time, Microsoft switched from the X86 to the ARM architecture and chose to cooperate with Qualcomm to use the Qualcomm Snapdragon XElite chip to provide more than 40 TOPS of computing power. Microsoft proposed the Copilot+PC solution. With the cooperation of Qualcomm, Copilot's AI capabilities are integrated into multiple levels from chip to system to application, can respond quickly to users locally, and can be combined with multiple native Microsoft Arm64 applications; it can also seek support for cloud models, including GPT-4O recently released by OpenAI. Qualcomm also launched the Snapdragon Development Kit for Windows at the conference, focusing on application creation and optimization for CoPilot+ PC.
The company and Qualcomm have maintained long-term cooperation, and products have been launched in all three business lines. The company has been working with Qualcomm for over 10 years and has a close partnership. In 2010, a joint laboratory was established, and in 2016, a joint venture was established with Qualcomm, Chuangtong Lianda. In 2022, Qualcomm took a stake in Qualcomm's smart driving platform company to enjoy smart driving. The field of cooperation between the company and Qualcomm has gradually expanded from mobile phones to the Internet of Things and smart cars, launching solutions for different scenarios, and has product applications in the fields of smart phones, edge computing, and smart cockpits.
End-side AI is being implemented at an accelerated pace, and the company has the advantage of an ecological card slot. As can be seen from the Microsoft Build Conference, Microsoft is willing to once again promote the transformation of the user experience on the PC side in the generative AI era. The release of a number of end-side AI capabilities and small models on the end side has strongly promoted the AI transformation of end side devices such as AI PCs. Advances in end-side AI are worth paying attention to. The company has been deployed in the field of end-side intelligence for a long time and is closely cooperating with Qualcomm. It is expected to have card advantages in the upcoming AI PC era. Currently, it has released solutions and products such as end-side AI interactive digital human and Rubik's Cube intelligent legal assistants. In the future, the company will continue to strategically develop the second growth curve (existing business+end side intelligence) and the third growth curve (end side intelligence+innovative business) to continuously explore the needs of end side AI application scenarios. With the accelerated implementation of end-side AI, the company is expected to usher in rapid development in the field of end-side intelligence.
We forecast the company's earnings per share for 2024-2026 to be 1.35/1.93/2.46 yuan, maintain the company's price-earnings ratio of 40 times in 2024, and the corresponding target price is 54.00 yuan, maintaining the purchase rating.
Risk warning
AI PC implementation falls short of expectations, intelligent automotive implementation falls short of expectations, smart IoT business expansion falls short of expectations, and other benefits account for a relatively high risk