ChatGPT transformed AI from a niche, behind-the-scenes tool into one of the fastest-growing consumer products in history. That’s only accelerated this year, as use of tokens—the basic building blocks of any AI query—has exploded, thanks to widespread enterprise adoption and the rise of agentic AI platforms like OpenClaw.
That’s caused surging AI costs in enterprises, as their systems start to consume more and more tokens. “Every chat generates a token, and when you scale AI use across organizations, costs start adding up,” Prakash Arunkundrum, HP’s chief strategy and transformation officer (CSTO), tells Fortune. “This is what all the data center guys are trying to solve: How to bring the token cost down.”
HP’s solution to the token problem is to sidestep it entirely, by shifting AI from the cloud to people’s devices, or the “edge.” HP is betting on “AI PCs,” personal devices capable of running AI models locally, and has also debuted its own local-first AI model, HP IQ.
“At the core of our strategy, we are building AI-powered devices, think AI PCs, Copilot-enabled printers, and meeting rooms that have smart intelligence peripherals which understand you,” Arunkundrum says. “We’re then stitching them together with software, so that we can deliver experiences in an office across the entirety of your device fleet.”
HP reported better-than-expected earnings in the first quarter of 2026. The U.S. company generated $14.4 billion in revenue, a nearly 7% jump. Personal systems revenue came to $10.3 billion, increasing by 11%. Interim CEO Bruce Broussard credited the jump to “continued momentum in AI PCs,” which now make up 35% of devices sold. The company will report second quarter earnings on May 27.
“Edge AI is local, private, and secure, and it drives down the total cost of ownership by slashing token use,” Arunkundrum says. “Imagine you’re running a quality inspection in a manufacturing line—you don’t want that to go somewhere else.”
Running AI locally also helps ensure data sovereignty, which Arunkundrum argues is crucial in Asia, where governments increasingly view protecting data as essential for privacy, national security, and tech self-sufficiency.
“In Singapore and greater Asia, the need for a sovereign cloud with an environment within your country prohibits the use of AI in some cases,” Arunkundrum says. “With edge AI, you can run many of these models—be it open source or proprietary—right from your device” and thus keep all data in-country.
Arunkundrum’s tech journey
Arunkundrum spent the early leg of his career cycling through management consulting firms in the San Francisco Bay Area, including PwC and A.T. Kearney. He then spent a decade at Logitech, eventually becoming the president of its business wing.
Arunkundrum said that his decade at Logitech shaped how he thinks about tech. “I am a product guy, so I think of customer and user experience as the most important thing; when we make a computer mouse at Logitech, for example, we’ll study the way it interacts with your hand, and how it can be an extension of you,” Arunkundrum explains. “From a leadership perspective, you have to start with the customer, and think about what their viewpoints, frictions and pain points are, and what might help them to excel.”
Arunkundrum joined HP last October as its CSTO, a new role created especially for him. He fondly refers to HP as “the OG startup”, and says he was attracted by its deep legacy. “Every tech company that you know of has been touched by HP, a business which our founders Bill and Dave started in a garage,” Arunkundrum mused.
His first year in the job has been marked by the global memory chip shortage. AI is fueling a massive surge in demand for these chips, the most sophisticated of which are made by a small number of manufacturers. That’s caused prices to spike due to short supplies, putting pressure on devicemakers across the globe.
HP reported an operating margin of 5.3% in the first quarter of the year, lower than the 6.3% reported a year earlier. In February, it also warned that profit in the current quarter might fall in the lower end of its forecast, due to “increasing memory costs.”
Arunkundrum declined to comment on how the memory chip shortage is specifically affecting HP, citing the company’s upcoming earnings. Yet he explained that “memory shortages are affecting everyone… and as a large company that has millions of devices which people need from us, it’s certainly been something that we’ve been navigating.”
HP’s AI playbook
As a new generation of AI labs races ahead in Silicon Valley, HP is betting that its edge lies in putting AI to work on devices and in offices.
An AI-driven software layer, called the workforce experience platform (WXP), sits atop HP’s business hardware innovations. First unveiled in 2024, the WXP serves as an enterprise’s in-house IT “command center”, giving chief information officers a bird’s eye view of the company’s devices and applications via telemetry and analytics.
Under Arunkundrum’s leadership, the company is also undertaking an AI upheaval from within. In the APAC region, 78% of its staff now use AI in their daily workflow, above the global average of 72% (as calculated by the Boston Consulting Group).
Last October, it launched Garage 2.0, an innovation incubator in Singapore that gives startups access to HP engineers, infrastructure and customers, in what’s meant to be a deliberate echo of the “very small garage”, in Arunkundrum’s words, where the company itself began.
“The idea behind Garage 2.0 was to bring startups together with others in the ecosystem that we work with, including academics and those who enable us to bring products to market,” Arunkundrum says.
Most of all, Arunkundrum hopes that HP’s products will benefit society more broadly. “The wish is that we have impacted humans for the better and extended human potential,” Arunkundrum concludes. “That’s the ten-year goal.”
