Miles Harding is an architect who envisions a brick shaped like a jigsaw puzzle piece that could enable buildings to withstand earthquakes. Seeking a way to get organized, he buys a personal computer to help him develop his ideas. Although he is initially unsure that he will even be able to correctly operate the computer, he later buys numerous extra gadgets that were not necessary for his work, such as switches to control household appliances like the blender, a speech synthesizer, and a microphone. The computer addresses Miles as "Moles", because Miles had incorrectly typed his name during the initial set-up. When Miles attempts to download the entire database from a mainframe computer at work, his computer begins to overheat. In a state of panic, Miles uses a nearby bottle of champagne to douse the overheating machine, which then becomes sentient. Miles initially is unaware of the computer's newfound sentience, but discovers it one night when he is awakened by the computer in the middle of the night when it mimics Miles talking in his sleep.
A love triangle soon develops among Miles, his computer (who later identifies himself as Edgar), and Miles's neighbor, an attractive cellist named Madeline Robistat. Upon hearing her practicing Minuet in G major, BWV Anh. 114 from Notebook for Anna Magdalena Bach on her cello through an air vent connecting both apartments, Edgar promptly elaborates a parallel variation of the piece, leading to an improvised duet. Believing it was Miles who had engaged her in the duet, Madeline begins to fall in love with him though she has an ongoing relationship with fellow musician Bill.
At Miles's request, Edgar composes a piece of music for Madeline. When their mutual love becomes evident, however, Edgar responds with jealousy, canceling Miles's credit cards and registering him as an "armed and dangerous" criminal. Upon discovering this humiliation, Miles and Edgar have a confrontation, where Miles shoves the computer and tries to unplug it, getting an electric shock. Then the computer retaliates by harassing him with an improvised maze of remotely controlled household electronics, in the style of Pac-Man.
Eventually, Edgar accepts Madeline and Miles's love for each other, and appears to commit suicide by sending a large electric current out through his acoustic coupler modem, around the world, and finally reaching back to himself just after he and Miles make amends.
Later as Madeline and Miles go on vacation together, Edgar's voice is heard on the radio dedicating a song to "the ones I love", titled "Together in Electric Dreams". The credits are interspersed with scenes of the song being heard all over California, including a radio station trying to shut it off, declaring that they do not know where the signal is coming from.
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