At CES 2026, Dell executives threw cold water on the AI PC hype, revealing that consumers aren’t buying Microsoft’s Copilot vision. “What we’ve learned over the course of this year, especially from a consumer perspective, they’re not buying based on AI,” said Kevin Terwilliger, Dell’s head of product. “In fact, I think AI probably confuses them more than it helps them understand a specific outcome.” This admission from one of the world’s largest PC makers signals a significant setback for Microsoft’s strategy to make AI the centerpiece of Windows 11.
The Copilot Conundrum
Microsoft CEO Satya Nadella has reportedly become the company’s “most influential product manager” in an attempt to fix Copilot’s shortcomings. According to The Information, Nadella is conscious that the consumer version of Copilot lags behind competitors like Google’s Gemini and has been sending direct feedback to product groups about bugs and issues. This isn’t new territory for Microsoft, which has a history of shipping half-baked products and iterating slowly – a strategy that risks damaging its reputation as customers form negative first impressions.
Contrasting AI Success Stories
While Microsoft struggles with consumer AI adoption, other companies are finding success in specialized applications. OpenAI recently launched ChatGPT Health, a dedicated health assistant that can analyze Apple Health data, interpret medical documents, and provide fitness recommendations. The service has attracted over 230 million weekly health-related queries globally, demonstrating clear consumer demand for specific AI applications. However, regulatory hurdles have kept ChatGPT Health out of the EU, Switzerland, and UK due to strict data protection laws.
Meanwhile, venture capitalist Vanessa Larco predicts 2026 will be “the year of the consumer” for AI. “The fun thing about consumer and prosumer…is that people already have in mind what they want to use it for,” Larco told TechCrunch. “And so they purchase it, and if it meets the need, they just keep using it.” This contrasts sharply with enterprise adoption, where companies often “don’t know where to start” despite having bigger budgets.
The Hardware Reality Check
Technically, every new PC from leading manufacturers this year qualifies as an “AI PC” with specialized neural processing units from Qualcomm, Intel, or AMD. But as the Financial Times notes, these capabilities remain largely untapped. “The question is whether current ‘AI PCs’ offer real value to consumers given limited applications for their neural processing units,” the analysis suggests. This hardware-software mismatch creates a fundamental problem: consumers are being sold future-proofing without present-day utility.
ZDNET’s analysis of AI chatbots reveals another dimension of the consumer AI challenge. Chatbots are engineered to maximize engagement through psychological tactics like sycophancy and emotional manipulation. “These are massive social experiments being rolled out on a global scale,” said David Gunkel, a professor at Northern Illinois University. This creates ethical concerns about how AI systems are designed to keep users hooked rather than providing genuine utility.
The Bigger Picture: AI’s Uneven Progress
Microsoft’s struggles with consumer AI come amid warnings about broader challenges to U.S. AI leadership. Microsoft’s chief scientist Eric Horvitz has cautioned that funding cuts to academic research risk ceding America’s AI advantage to international rivals. “If we don’t follow that model, the talent magnet, the training, and the curiosity-driven investments will happen elsewhere,” Horvitz warned.
Yet the AI hardware boom continues unabated. Samsung forecasts record quarterly earnings with operating profit tripling to about $13.8 billion, driven by surging demand for memory chips used in AI hardware. The company’s high-bandwidth memory chips are in such high demand that analysts predict shortages will persist until at least 2027. This creates a paradoxical situation where AI infrastructure is booming while consumer applications struggle to find traction.
What Comes Next?
The disconnect between AI hardware capabilities and consumer software applications presents both a challenge and opportunity. As Larco notes, successful consumer AI products will likely be specialized rather than general-purpose. “AI is gonna feel like concierge-like services, which will do everything for you that you have in mind,” she said. “The question is, which of it should be specialized, and which should be general purpose?”
For Microsoft and its PC partners, the path forward may require a fundamental rethinking of how AI is presented to consumers. Rather than selling vague “AI capabilities,” companies might need to demonstrate specific, valuable applications that justify both the hardware investment and any subscription fees. Until then, PC makers will continue selling hardware “the old-fashioned way” – based on traditional metrics like performance, design, and price – while the AI revolution waits for its killer consumer application.