By Tae Kim

A Durable Cycle. Hi everyone. For the last three years, the artificial intelligence trade has taken all the oxygen out of the room, especially as the typical PC upgrade cycle that tech investors always count on never arrived.

Well, it looks like that refresh cycle is finally here, and it shouldn't be dismissed.

The first clear signal came late last month when Intel reported solid earnings. Chief Financial Officer David Zinsner told me then that demand for PCs had been better than the company expected as corporations refresh their installed base of computers to move to the current version of Microsoft Windows just as data centers are upgrading servers at a faster pace.

Several factors are likely at play. During the Covid-19 pandemic, PC sales soared as people needed equipment to work from home. The peak year was 2021, meaning those computers are now getting long in the tooth. Then in October, Microsoft officially ended support for Windows 10, which seems to be sparking upgrades to PCs running Windows 11.

"The Windows refresh is happening more significantly than I think we expected," Zinsner said on Intel's earnings call with analysts, adding there will be chip shortages across Intel's businesses into next year from the higher-than-expected demand.

Following Intel's remarks, the big question was whether rival Advanced Micro Devices was seeing the same trend. Both Intel and AMD use the x86 chip architecture in making CPU processors that act as the main computing brains for PCs and servers.

The answer, it turned out, was yes. On Tuesday, AMD CEO Lisa Su said many customers are planning "substantially" larger CPU buildouts in the next few quarters to support higher AI demand. A sometimes overlooked fact is every AI server with GPUs also incorporates a CPU to help manage and coordinate the processing of AI workloads.

This PC and server upgrade cycle is likely to last for several quarters. Despite the rise of tablets and smartphones, consumers and employees still use computers for daily work and living. Corporations are unlikely to risk security problems by staying with an older unsupported version of Windows. Server sales are also likely to remain robust given the current second wave of AI data center growth that's being driven by reasoning models and new use cases.

In full disclosure, I've been wrong about AMD of late. Earlier this year, I was pessimistic about AMD's 2025 fortunes, noting that the company wouldn't have a good offering this year to compete with Nvidia's rack scale AI servers. These rack scale servers have 72 GPUs linked together inside one server rack, offering higher performance. While I knew AMD was planning its own competitive 72 GPU server in late 2026, I thought that was too far off for investors to care.

That thinking turned out to be wrong. Not only is AMD's PC chip and server business now on a surprising upswing, the company has also figured out a way to pull forward investor focus on its future rack-scale technology through its new partnership with OpenAI.

The agreement last month entails OpenAI deploying six gigawatts of AMD GPUs, starting with rack-scale MI450 GPU servers in the second half of 2026. While AMD had to give up effective stock ownership to OpenAI through warrants, it is still a validation of AMD's tech road map.

On the earnings call last night, Su also hinted that she would be raising her prior $500 billion AI data center chip forecast for 2028 at AMD's financial analyst day next week. She said AMD's AI business is on track to grow to tens of billions of dollars in annual revenue by 2027.

With the improving AI chip prospects and stronger-than-expected PC industry fundamentals, AMD shares have soared by nearly 50% the last three months and are now up over 100% this year. Intel has also rallied 90% the last three months on robust results and a series of successful capital raises from the U.S. government and Nvidia.

It might not be wise to chase the stocks after these rallies given their current valuations. AMD and Intel trade at 43 times and 68 times forward earnings, respectively. It now makes sense to wait for pullbacks.

The most attractive way for investors to benefit from the improving PC theme is Dell Technologies, a maker of computers, traditional servers, and AI servers. Dell trades for 14 times forward earnings.

Ultimately, investors shouldn't underestimate this PC cycle. It has been a long time coming.

This Week in Barron's Tech

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   -- Super Micro Gives a Mixed Outlook. The Stock Is Falling. 
 
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      Data-Center Darling. 

Write to Tae Kim at tae.kim@barrons.com or follow him on X at @firstadopter.

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November 05, 2025 16:02 ET (21:02 GMT)

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