Dell Technologies Inc. is becoming cool again, emerging as a beneficiary of the artificial-intelligence trend that has sent shares of chip stocks like Nvidia Corp. and Advanced Micro Devices Inc. soaring over the past year.
Wall Street continues to look for AI plays that are already seeing the benefits of frenzied spending in their financial results. Dell
DELL,
looks to be in that camp, disclosing $800 million in shipments of AI-optimized servers for the latest quarter, with orders for them up almost 40% sequentially.
See also: Dell’s big quarter, fueled by surge in AI-server demand, sends stock soaring 19%
“With several quarters of solid AI momentum now and healthy backlog growth as well, Dell has further solidified its AI credibility and likely wins over more believers,” wrote Raymond James analyst Simon Leopold.
Though Leopold doesn’t explicitly forecast AI metrics for Dell, he said the company’s numbers there “exceed what we anticipated, and likely surprised investors as well.”
He has an outperform rating on the stock and lifted his price target to $120 from $82 in a Friday report.
Dell shares were ahead nearly 27% in morning trading Friday and on track for their largest single-day percentage gain on record, with FactSet data going back to 2016.
Melius Research analyst Ben Reitzes likened the server business to “razors,” which “attach ‘blades’ like storage, software, services and financing.”
He further noted that “AI razors (servers) have lower gross margins than traditional servers,” but “they seed even more sales of higher margin ‘blades,’” hence why Dell’s server commentary is “all that matters.”
Reitzes also said that Dell’s report contained positive signals for AMD
AMD,
and Nvidia
NVDA,
“While the Nvidia ‘sizzle’ from the Dell call was so obvious, you may not realize how good this Dell quarter was for AMD,” he wrote. “Traditional server [central processing units] picking up helps support AMD margins and lends further upside to its data-center segment.”
Additionally, he thinks Dell got “meaningful orders” for AMD’s MI300X chip “that will start shipping this quarter and pick up throughout the year.”
He has a buy rating and $152 target price on Dell’s stock.
Opinion: Look out, Super Micro: Dell is cementing itself as an AI play too.
Mizuho desk-based analyst Jordan Klein called Dell the “Swiss Army knife” of generative AI, as the company builds AI performance servers that run on graphics processing units from Nvidia and AMD.
What’s more, Dell has “expertise and large and expansive capabilities in all areas,” along with relationships in the enterprise that are “second to none.”
Dell’s “$2.9 billion AI backlog will continue to grow, but lead times are coming down and Dell can convert this to revenue more rapidly, creating better opportunity to upside” on a quarter-to-quarter basis, according to Klein.
As for AMD, he says Dell’s commentary “should bode well” for the company — and even for Intel Corp.
INTC,
“General purpose CPU demand has been depressed for a year and while AMD is aided by cloud strength from their new higher performance Genoa CPU, [Intel] is struggling on lower volumes and a lagging product cycle that they hope to correct into [2024],” he said.
AMD’s stock was up 2.7% in Friday morning trading, while Intel’s was up 0.8% and Nvidia’s was ahead 1.9%.
Read: AMD is worth $300 billion for the first time. These stats show its dramatic rise.
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