Dell’s stock surged over 11% to reach a record high yesterday, following Morgan Stanley’s increase in price target and forecast that the business would benefit from the unquenchable need for artificial intelligence servers.
TakeAway Points:
- After Morgan Stanley predicted that Dell would profit handsomely from the unquenchable demand for AI servers, the company’s shares surged 11% on Wednesday to an all-time high.
- The Nvidia chips power the majority of these AI servers, and the CEOs of Nvidia and Dell have a tight working connection.
- On May 30, Dell is anticipated to make its quarterly financial announcement.
Dell Shares Surges
According to a note from Morgan Stanley analyst Erik Woodring on Wednesday, Dell is witnessing increasing momentum, particularly in gaining contracts to construct AI servers, which is opening up a new bull case for the stock. He raised his price objective for Dell shares from $128 to $152 and referred to it as a top choice.
“All-in, we are hearing about more AI server momentum at Dell than at any other OEM,” Woodring wrote, saying that the company’s fiscal 2025, which ends in February of next year, would bring in roughly $10 billion from AI servers.
The increase on Wednesday was the biggest since the stock had jumped on March 1st, following earnings that revealed the computer manufacturer had profited from the AI growth.
Dell shares are already up over 99% in 2024, trailing the 233% increase from rival AI servermaker Super Micro Computer but surpassing Hewlett Packard Enterprise’s 6% gains this year.
Demand for AI Server
Because Nvidia processors are used to implement cutting-edge AI models from businesses like Google, OpenAI, and Meta, they have grown in value in the technology sector. These chips are the foundation of the majority of AI servers. Dell offers servers equipped with the most recent Nvidia AI chips, such as the H100 GPU and the most recent Blackwell-generation chips.
During Nvidia’s annual conference in March, Jensen Huang, the CEO of Nvidia, seemed to suggest that customers wishing to order the newest AI chips should contact Dell.
“You’re going to need an AI factory,” Huang said. “And nobody is better at building end-to-end systems of very large scale for the enterprise than Dell.”
“Michael [Dell] is here and he’s happy to take your order,” Huang continued.
“While the near-exponential ramp of Nvidia GPU shipments and AI servers builds make it difficult to pin down exact growth rates,” Woodring wrote, he believes in Dell’s business for a number of reasons. The growing need for AI servers and the fact that Dell’s market share is rising are two of those factors.
According to what he stated, Dell might be able to “attach” extra hardware, such data storage, and upsell its clients.
Dell to Release April Quarter Profit this Month
On May 30, Dell is anticipated to release its profits for the April quarter. On May 22, Nvidia released its earnings for the quarter that ended in April.
Dell’s other division, which consists of manufacturing Windows-based PCs for individuals and companies, may benefit next week when Microsoft unveils new features at its conference, including much-anticipated AI technologies that many analysts believe will increase demand for new PCs.
A post-pandemic hangover has caused a two-year decline in PC sales as individuals and businesses who purchased new equipment in 2020 and 2021 postponed their next improvements.
However, Woodring said that the PC market is surpassing revised projections and is poised for growth, which is good news for Dell.
“We remain bullish on the PC market recovery as we are not only hearing about upgrade/refresh demand in our recent CIO and VAR checks, but also seeing upward revisions to notebook ODM builds in recent months,” Woodring wrote.
