The AI data center boom is squeezing PC and smartphone sales, with a decrease of more than 10% in the offing this year.
The surge in AI data center development is projected to cause a notable decline in PC and smartphone shipments this year. Analysts anticipate a reduction exceeding 10% as resources are diverted.
Analysts are forecasting a significant drop, over 10%, in worldwide PC and smartphone sales for the current year. This downturn is primarily attributed to the memory scarcity exacerbated by massive hyperscaler investments in AI data centers.
Gartner reports that PC shipments are set to decrease by 10.4% in 2026 compared to 2025. This reduction is a direct consequence of limited memory availability pushing prices upward, as per their findings. Meanwhile, IDC foresees an even steeper drop, estimating an 11.3% contraction during the identical timeframe.
Similarly, the smartphone sector is poised for substantial year-over-year shipment decreases in 2026. Gartner projects an 8.4% fall, while IDC’s forecast is more pessimistic at a 12.9% reduction.
“The present scenario has become more unfavorable than even our most conservative predictions from just a few months prior,” stated IDC in a Thursday blog post. In December, the analytical firm had previously predicted an 8.9% decline in PC shipments as its worst-case outcome.
“The rapid escalation in memory pricing has caught everyone off guard,” commented Ranjit Atwal, Gartner’s research director, noting a projected 130% year-over-year increase for 2026. He further explained, “This stems from a demand-side problem. All available demand is being absorbed by hyperscalers, putting significant pressure on PC and smartphone manufacturers.”
Gartner indicates that for PC manufacturers, the heightened memory expenses will constitute 23% of the overall bill-of-materials cost this year, a rise from 16% in 2025. This upward trend is anticipated to translate into higher PC prices, with the researcher forecasting a 17% increase in 2026.
Analysts suggest that major PC manufacturers are better positioned to endure these challenges, though they won’t be entirely immune. HP, during its first-quarter earnings call, revealed that memory now represents 35% of a PC’s build cost, a substantial increase from 15% to 18% in the prior quarter.
The outlook is considerably graver for smaller suppliers and those already contending with extremely narrow profit margins. Atwal remarked, “Market consolidation is a distinct possibility. It’s fundamentally a matter of survival of the fittest.”
Gartner also projects that enterprise customers, facing elevated prices, will likely extend their PC refresh cycles, anticipating a 15% increase in duration throughout 2026.
Enterprise purchasers are currently engaged in negotiations with suppliers within a rapidly evolving market. Atwal noted, “They are endeavoring to ascertain what constitutes a fair price right now.” He added, “Suppliers are no longer offering extended price guarantees; instead, they are quoting prices valid for merely two or three weeks.”
Atwal explained that budgetary limitations mean certain PC acquisitions will be postponed. This could pose a challenge for organizations that upgraded to Windows 11 on their existing hardware last year. He elaborated, “This subsequently creates problems because…Microsoft will undoubtedly introduce new Windows 11 features, and your current hardware might lack the necessary capacity to support some of them.”
Atwal anticipates that companies will persist in their investment in AI PCs, albeit at a moderated pace. They are also expected to opt for devices equipped with less memory.
This market upheaval is projected to persist indefinitely. Atwal observed, “Prices are not just rising in the immediate term… they are expected to stay elevated almost until the close of 2027,” highlighting fundamental shifts within the market. He concluded, “Our recommendation is to make purchases now, or defer them [until prices stabilize], as any deal secured currently will likely represent the most advantageous pricing available.”
