By Asmita - Oct 02, 2024
Goldman Sachs predicts a nearly 40% upside for Dell due to growing demand for AI servers fueled by Nvidia GPUs. Dell's strong performance in high-performance computing is reflected in a 40% sequential increase in AI server orders, with a backlog of $2.9 billion. Despite optimism, some analysts like Morningstar's William Kerwin caution that AI servers' impact on Dell's bottom line may be overestimated. However, Dell's success in AI servers and diversified portfolio position it well to capitalize on industry trends and emerging technologies.
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Goldman Sachs is betting big on Dell, predicting a nearly 40% upside due to surging demand for AI servers. The investment firm cites Dell’s strong performance in the high-performance computing market, particularly with Nvidia’s graphics processing units (GPUs). Dell’s orders for AI servers increased nearly 40% sequentially, with a backlog reaching $2.9 billion at the end of its fiscal year. This growth underscores the industry’s shift towards AI and high-performance computing.
The AI server market’s expansion is expected to positively impact the global PC market, which has experienced slowing revenue growth since 2022. An upcoming PC refresh cycle and AI’s long-term effects on the PC market are anticipated to continue this rebound. Dell’s success in AI servers demonstrates its ability to adapt to emerging technologies. As AI adoption accelerates, Dell is well-positioned to capitalize on this trend. The company’s diversified portfolio, including client solutions, infrastructure, and services, will also benefit from AI-driven growth.
Not all analysts share Goldman’s optimism. Morningstar’s William Kerwin believes investors overestimate AI server demand’s benefit to Dell’s bottom line. Kerwin notes that GPU servers comprised less than 2% of Dell’s sales in the most recent fiscal year. However, he acknowledges the business is growing rapidly and expects it to reach 10% of Dell’s sales over the next five years. Kerwin’s caution highlights the importance of balancing near-term expectations with long-term potential.
Goldman’s bullish prediction and Morningstar’s cautious optimism underscore Dell’s potential for growth. Investors should consider Dell’s AI server momentum, diversified portfolio, and industry trends when evaluating the stock. As AI adoption continues, Dell’s position in the market will be crucial to its success. With a strong track record of innovation and adaptation, Dell is poised to capitalize on emerging technologies. Keep a close eye on Dell’s future developments and earnings reports to gauge the company’s progress in the AI server market.