The rising AI tide continues to lift all tech boats. And we mean all tech boats, even somewhat forgotten giants like Dell.
Last week, shares of the personal computing company surged after executives doubled its long-term revenue and profit forecasts, thanks to its key and widening role in the AI infrastructure buildout. Which begs the question: Is Dell suddenly a growth stock?
Extreme AI Makeover
Dell’s AI transformation story is pretty simple: AI companies have an appetite for AI-powering servers that already exceeds $100 billion a year, according to Grand View Research, and Dell (which traditionally focused solely on PCs) is now a leading manufacturer of said servers. In its second-quarter earnings report, the company said sales in its servers and networking segment rose 69% from a year earlier, and it projects selling $20 billion worth of AI servers this year. Meanwhile, its old-school PC unit continues to generate steady cash flows, stabilizing the expensive and competitive server business.
It’s enough for the company to make significant changes to its long-term outlook:
- In its earnings call last week, Dell said it now expects annual revenue to grow between 7% and 9% long term, up from previous forecasts of 3% to 4%, and said earnings per share would grow at least 15%, up from earlier forecasts of just 8%.
- Shares of Dell spiked after the Tuesday earnings call, hitting an all-time intraday trading record on Wednesday. Dell climbed 3.4% last week, widening its growth so far this year to 30%.
“We were all wrong how big we thought the AI market was two years ago, and it’s nothing but bigger,” COO Jeff Clarke said ahead of the earnings call last week.
TikToking Clock: The AI pivot keeps Dell at the forefront of the tech industry and continues the winning streak for CEO and founder Michael Dell, who is estimated to be the 10th-richest person in the world by Bloomberg’s Billionaire Index. Last month, Dell, the person, scored another major win when he was named alongside Larry Ellison, Rupert Murdoch and Lachlan Murdoch as one of the US investors involved in the takeover of TikTok’s US operations. For his part, Dell seems to know the good times won’t last forever. In an interview on CNBC, Dell admitted that “at some point, there will be too many [data centers].” Add him to the list of mildly concerned bubble-watchers.
