The Zacks Computer – Micro Computers industry participants like Apple AAPL and Dell Technologies DELL are benefiting from steady demand for enterprise devices, including laptops, tablets and smartphones. The improving availability of 5G-enabled smartphones has been a key catalyst for industry participants. The launch of foldable and artificial intelligence (AI) and machine learning-infused smartphones, tablets, wearables, hearables and PCs is another major growth driver for industry participants. However, industry players are suffering from waning demand for consumer PCs. Heightened geopolitical challenges post-U.S. President Donald Trump’s decision to levy tariffs on trade partners are expected to hurt industry participants. Weak demand in China has been a headwind.
Industry Description
The Zacks Computer – Micro Computers industry comprises companies that offer smartphones, desktops, laptops, printers, wearables and 3-D printers. Such devices are based either on iOS, MacOS, iPadOS, WatchOS, Microsoft Windows, or Google Chrome and Android operating systems. The companies predominantly use processors from Apple, Intel, AMD, Qualcomm, NVIDIA and Samsung. Expanding screen size, better display, and enhanced storage capabilities have been the key catalysts driving the rapid proliferation of smartphones. This has been well-supported by faster mobile processors. Laptops, both consumer and commercial, benefit from faster processors, sleek designs and expanded storage facilities. The addition of healthcare features has been driving the demand for wearables.
3 Micro Computer Industry Trends to Watch
Enterprise Adoption Remains Healthy: Strong enterprise demand has been benefiting the industry participants. The growing adoption of a hybrid working environment bodes well for the players, as demand for laptops and tablets is expected to increase. Demand for smart devices that offer facial recognition, retina scans or finger impressions to verify the user for biometrics is gaining traction as enterprises enhance security.
Impressive Form Factor Drives Demand: Expanding screen size, better display and enhanced storage capabilities have been the key catalysts driving the rapid proliferation of smartphones and tablets. This has been well-supported by faster mobile processors from Qualcomm, NVIDIA, Apple and Samsung. Improved Internet penetration and speed, along with the evolution of mobile apps, have made smartphones indispensable for consumers. Improved graphics quality is making smartphones suitable for playing sophisticated games. This is driving the demand for high-end smartphones and opening up significant opportunities for device makers.
AI-enabled PCs to Boost Demand: Personal computers (desktops and laptops), be they Windows or Apple’s MacOS-based ones, are expected to benefit from AI infusion. The addition of neural processing units (NPUs), which are dedicated units to manage AI-related tasks, in PCs is a driving demand for AI-enabled devices. AMD, Qualcomm and Intel offer NPU chips with OEMs such as ASUS, Acer, Lenovo, Microsoft, HP and others building these AI-enabled devices. Canalys expects AI-capable PC shipments to surpass 100 million in 2025, representing 40% of all PC shipments. This offers significant growth opportunities for industry participants.
Zacks Industry Rank Indicates Bright Prospect
The Zacks Computer – Micro Computers industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #45, which places it in the top 18% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Given the bright outlook, there are a number of stocks worth watching in the industry. But before we present those stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector and S&P 500
The Zacks Computer – Micro Computers industry has underperformed the broader Zacks Computer and Technology sector, as well as the S&P 500 index, over the past year.
The industry has dropped 8.5% over this period compared with the S&P 500’s return of 11.3% and the broader sector’s appreciation of 10.8%.
Industry’s Current Valuation
On the basis of forward 12-month P/E, which is a commonly used multiple for valuing computer stocks, we see that the industry is currently trading at 27.34X compared with the S&P 500’s 22.64X and the sector’s 27.60X.
Over the last five years, the industry has traded as high as 32.27X and as low as 18.74X, with the median being 25.72X, as the chart below shows.
2 Computer Stocks to Watch Right Now
Dell Technologies: This Zacks Rank #1 (Strong Buy) company is benefiting from strong demand for AI servers, driven by ongoing digital transformation and heightened interest in generative AI applications. You can see the complete list of today’s Zacks #1 Rank stocks here.
Expanding partner base, which includes NVIDIA, Microsoft, Meta Platforms and Imbue, has been a major growth driver for Dell Technologies.
However, Dell is suffering from a challenging macroeconomic environment along with stiff competition in the PC market. The broader PC market recovery is slower than expected, with customers delaying purchases to evaluate AI-enabled PCs and prepare for the Windows 10 end-of-life.
The Zacks Consensus Estimate for fiscal 2026 earnings has inched up by a penny to $9.44 per share over the past 30 days. The stock has appreciated 11% year to date.
Apple: This Zacks Rank #3 (Hold) company’s prospects ride on the success of Apple Intelligence. Apple is seeing better iPhone 16 sales in regions where Apple Intelligence is available.
Apple expanded the availability of Apple Intelligence with iOS 18.4, iPadOS 18.4, and macOS Sequoia 15.4 updates in new languages, including French, German, Italian, Portuguese (Brazil), Spanish, Japanese, Korean, and Chinese (simplified) — as well as localized English for Singapore and India — and are accessible in nearly all regions around the world. At the end of 2025, Apple Intelligence will be available in eight more languages: Danish, Dutch, Norwegian, Portuguese, Swedish, Turkish, Chinese (traditional) and Vietnamese.
However, stiff competition from Chinese handset makers and tariff-related headwinds are major concerns for Apple.
The Zacks Consensus Estimate for fiscal 2025 earnings has been steady at $7.10 per share over the past 30 days. Apple shares have dropped 15.2% year to date.
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