Microsoft (MSFT 0.22%) unveiled a new lineup of artificial intelligence (AI) powered personal computers (PCs) it is calling Copilot Plus PCs. It is teaming up with a number of manufacturing partners, including Acer, Asus, Dell, HP, Lenovo, and Samsung and is looking to sell 50 million AI PCs this year.
It will also be launching new AI-powered Surface models, which is its own brand of laptops, called the Copilot Plus Surface Laptop and Copilot Plus Surface Pro, which is a flexible business tablet.
The devices will come with a redesigned Windows 11 operating system that will have more Copilot integrations. Copilot is Microsoft's AI assistant, and it too will be getting an upgrade based on OpenAI's new GPT-40 model.
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One of the big AI features that Microsoft demonstrated is called Recall. The tool will internally track a user's actions across both the web and device and allow them to search for and retrieve these actions, whether a PowerPoint presentation, a chat conversation in a third-party app, or the name of a restaurant the user was looking at on a website. The information, meanwhile, will remain secure on the device.
The new AI PCs are expected to begin to ship in June with prices starting just under $1,000.
With its new lineup of computers, Microsoft is taking direct aim at Apple (AAPL -0.82%). At the event, the company specifically called out that Copilot Plus PCs are 58% faster than Apple's M3 MacBook Air. It also talked up how light and thin the devices are, something Apple always prides itself on.
Microsoft has clearly taken the early lead over Apple in the AI race. However, Apple is not standing by idly. In fact, there have been reports that a top Apple executive was just in Taiwan to meet with executives at Taiwan Semiconductor Manufacturing (NYSE: TSM) looking to secure all their new 2-nanometer chip-making capacity to build its own AI chips.
Apple is TSMC's largest customer by far, so it has some pull, and it is believed that Apple made the same move when TSMC moved to 3-nanometer technology. However, given the current demand for AI chips, the stakes are higher, and Apple could ice out some of its competition.
Which is the better stock to buy?
Microsoft has been at the forefront of AI through its partnership and large investment in OpenAI. Azure, its cloud-computing offering, has been the biggest beneficiary so far, but the company has seen AI help drive growth throughout its various business segments.
Apple, meanwhile, has thus far been an AI laggard, while at the same time it has had to deal with falling iPhone demand in China. Its app-store commissions have also been reduced in Europe, and the company is being sued by the U.S. Department of Justice for "monopolizing smartphone markets."
This has led to a revenue-growth divergence between the two companies, with Microsoft growing its most-recent quarterly revenues by 17%, while Apple saw its revenue fall 4%.
MSFT PE Ratio (Forward) data by YCharts.
Microsoft currently has a higher forward price-to-earnings (P/E) multiple than Apple, trading at 37 times versus 29 times for Apple. However, given its much higher revenue growth, this is more than justified.
At this point in time, Microsoft has surpassed Apple as an innovation leader and is the better stock to buy. I wouldn't count Apple out, but it has relied too heavily on its brand power and needs to return to its innovative roots.
