Citi analysts expressed concerns over the strength of the PC market recovery in a note Wednesday, stating it "appears weaker than expected" based on recent conversations with key industry players such as Intel (NASDAQ:INTC), Dell Technologies (NYSE:DELL), and Western Digital (NASDAQ:WDC).
While August notebook shipments increased by 15% month-over-month, in line with expectations following a weak July, Citi's analysts maintain a cautious outlook on the overall PC market.
Analysts forecast a 4% quarter-over-quarter increase in notebook shipments for Q3 2024, slightly below the normal seasonal growth rate of 5%.
The lower-than-expected growth is attributed to "lackluster demand," reflecting broader concerns about the cooling of PC demand.
"We believe the inventory replenishment in PCs is over and could be a mild headwind near-term," added Citi.
Looking ahead to 2024, Citi forecasts 256 million PC units to be shipped, which represents only 1% year-over-year growth. This figure aligns with pre-pandemic levels, signaling that the post-pandemic surge in demand for PCs has fully dissipated.
Despite these concerns, Citi continues to recommend AMD with a Buy rating, forecasting a 2024 earnings-per-share (EPS) of $2.60, above the consensus estimate of $2.55.
However, the firm remains Neutral on Intel, citing a forecasted EPS of ($0.36) for 2024, still slightly better than the consensus estimate of ($0.43).
According to recent data from technology market analyst firm Canalys, there were 8.8 million AI-capable PCs shipped worldwide in the second quarter, which equates to 14% of all laptops and desktops shipped during the three-month period ending June 30.
Nevertheless, while August notebook shipments were in line with expectations, Citi believes the broader outlook for the PC market remains cautious as the anticipated recovery appears to be losing momentum.