Dell Escapes Nvidia’s Shadow as Its Own AI Tailwinds Accelerate

Dell Escapes Nvidia’s Shadow as Its Own AI Tailwinds Accelerate

(Bloomberg) — Shares of Dell Technologies Inc. have been performing like market leader Nvidia Corp. lately, and investors are betting the company will get a similar boost from artificial intelligence.

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The maker of personal computers and servers has emerged as one of the biggest winners of the AI ​​boom, and that narrative will likely be reinforced when it reports first-quarter results after the close. Confirmation of improving growth prospects could continue to support a stock that is at an all-time high while trading at a discount to other tech favorites.

Dell recently generated excitement by unveiling a line of AI-optimized PCs, boosting hopes that such features could spark a long-awaited upgrade cycle from customers and businesses. HP Inc. on Wednesday reported the first increase in PC sales in two years.

At the same time, its high-powered servers have been endorsed by Nvidia CEO Jensen Huang, who praised his company’s “great partnership” with Dell at its GTC conference and said that “no one is better at build very high quality end-to-end systems.” on a larger scale for the company than Dell.

The company “has become a very important part of the AI ​​ecosystem, and it still hasn’t gotten enough credit for that,” said Doug Clinton, managing partner at Deepwater Asset Management.

“The PC and server businesses will drive growth in the coming years, which will support both the stock and the multiple. We really view it as a growth and value game, because the growth story is still underappreciated and the multiple is very low compared to other AI games.

Shares have soared 127% this year and are coming off a six-day rally, their longest streak since July. The stock fell 3% on Thursday. Much of this year’s gains follow Dell’s previous report, which showed AI fueling massive demand for its servers.

One reason Dell may be somewhat off the investor radar is that while its market capitalization exceeds $127 billion, making it larger than the vast majority of S&P 500 constituents, it is not a member of the large cap group. stock index. It was previously ineligible due to its multiple share classes, but the S&P Dow Jones Indices last year removed a rule preventing such companies from being included.

Analysts expect Dell to be added and view its inclusion as a potential catalyst for the stock. Super Micro Computer Inc., another play on AI servers, was added in March, despite a market capitalization of less than $50 billion.

The S&P 500 is rebalanced every quarter, with the next one scheduled for June. Becoming a component would open Dell to a new universe of investors who use the S&P 500 as a benchmark, as well as flows into passive funds that track the index.

“Dell remains an underowned and underweight stock and with the potential catalysts of AI and possible inclusion in the S&P,” Bank of America analyst Wamsi Mohan wrote in a May 29 report in which he raised its price target, citing the beneficial impact of AI Servers, high-end storage and PCs.

BofA’s higher target reflects how bullish analysts are on the stock. More than 80% of companies tracked by Bloomberg recommend buying the stocks, and Morgan Stanley puts them at the top of the list, calling them the best stocks to drive server momentum, impact storage demand and improve the PC market .

Read more: Dell sales appear to be recovering on AI servers: overview

This growing optimism kept the group from entering nosebleed territory. The company’s 2025 net income consensus rose 7.6% over the past month, according to data compiled by Bloomberg, while the revenue consensus is up 1.3% over that period. .

Shares trade at 22 times estimated earnings, a notable discount to the Nasdaq 100 Index and cheaper than other AI stocks including Nvidia, Super Micro and Microsoft Corp. However, Dell’s multiple is a record for the stock, and well above its five. -annual average of 5.8.

“Dell is becoming an increasingly strategic AI vendor, but there’s a lot more appreciation for it than there was a few months ago,” said Dan Flax, senior research analyst at Neuberger Berman. “Demand for AI systems remains healthy, but other areas of the business remain cyclical, and if we see a macroeconomic slowdown, even growth as powerful as AI could slow.”

Technical table of the day

Shares of Salesforce Inc. fell as much as 19% on Thursday, a drop that would represent its biggest one-day percentage decline in more than 15 years. The sale came after the cloud-based software company said sales growth in the current quarter would stagnate at its slowest level in its history.

Top tech stories

  • Tesla Inc. is a company in disarray. Layoffs are increasing. Morale is broken. Its stock is plummeting and its sales are anemic. And, some investors say, there’s a distracted leader at the helm.

  • HP Inc. reported quarterly revenue that beat analysts’ estimates, including the first increase in PC sales in two years, an optimistic signal for a long-awaited market rebound.

  • Apple Inc. is looking for a senior engineer to help it create a TV and sports app for Android, a sign that the company is finally bringing its TV+ service to the rival smartphone platform.

  • Generative artificial intelligence is just beginning to make its economic impact felt, said Mira Murati, OpenAI Inc.’s chief technology officer.

  • Inc. increases its stake in Grubhub to 18%, expands its partnership with the food delivery service to allow U.S. users to order takeout directly on the company’s website and shopping app ‘Amazon.

Earnings expected on Thursday

  • Post-marketing

    • Dell Technologies

    • Marvell Technology

    • Zscaler

    • MongoDB

    • NetApp Inc.

    • Elastic

    • HashiCorp

    • SentinelOne

    • Asanas

    • Ambarelle

    • PagerDuty Inc.

–With the help of Subrat Patnaik.

(Updates for market opening.)

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