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Dell Rides on the AI Wave to New Record High

This photograph shows Dell Technologies' logo during the Mobile World Congress (MWC), the telecom industry's biggest annual gathering, in Barcelona on February 28, 2024. (AFP)
This photograph shows Dell Technologies' logo during the Mobile World Congress (MWC), the telecom industry's biggest annual gathering, in Barcelona on February 28, 2024. (AFP)
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Dell Rides on the AI Wave to New Record High

This photograph shows Dell Technologies' logo during the Mobile World Congress (MWC), the telecom industry's biggest annual gathering, in Barcelona on February 28, 2024. (AFP)
This photograph shows Dell Technologies' logo during the Mobile World Congress (MWC), the telecom industry's biggest annual gathering, in Barcelona on February 28, 2024. (AFP)

Dell Technologies shares surged 25% to hit a record high on Friday, following an upbeat annual forecast that indicated the tech equipment maker was benefiting from the AI boom.

The stock climbed to $118.8, and was set to add $17.7 billion to the company's market value and on track to register its best intra-day performance.

The surge provides further evidence that rising AI adoption is driving gains across enterprise technology vendors, and adds to the frenzy on Wall Street following Nvidia's stunning rally.

"We have positioned ourselves well in AI," COO Jeff Clarke said on Thursday, noting that more customers were demanding PCs and servers with AI capabilities.

Orders for the company's AI-optimized servers, including the flagship PowerEdge XE9680, jumped 40% sequentially in the fourth quarter, Clarke said.

At least nine brokerages raised their price targets on Dell after the results. Currently, over three-fourths of the analysts have a "buy" or higher rating with a median target price of $113.

More than 31 million Dell shares had changed hands as of 10:40 a.m. Eastern time, more than seven times the stock's 30-day average trading volume.

"Dell's AI business showed strong progress on key metrics... commentary on the PC market was similar to HP's: that a rebound is coming, but it is being pushed out to the second half of the year," said analysts at Bernstein.

PC and enterprise technology vendor HP's sales declined for a seventh straight quarter in the most recent three-month period.

The recent upside in the business comes after Dell struggled for most part of the last two years as worldwide computer sales sharply declined. While revenue fell less-than-expected in its fourth quarter, annual revenue dropped for the first time since re-listing in 2018.

Dell forecast revenue between $91 billion and $95 billion for its current fiscal year ending January 2025, largely above analysts' average estimate of $92.07 billion.

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All Eyes on AI to Drive Big Tech Earnings

OpenAI vs Microsoft- shutterstock
OpenAI vs Microsoft- shutterstock
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All Eyes on AI to Drive Big Tech Earnings

OpenAI vs Microsoft- shutterstock
OpenAI vs Microsoft- shutterstock

Over the next two weeks, the quarterly results of Big Tech giants will offer a glimpse on the bankability of artificial intelligence and whether the major investments AI requires are sustainable for the long haul.
Analysts at Wedbush Securities, one of Wall Street’s biggest believers in AI’s potential, expect "growth and earnings to accelerate with the AI revolution and the wave of transformation" it is causing.
The market generally agrees with this rosy AI narrative. Analysts forecast double-digit growth for heavyweights Microsoft and Google, in contrast to Apple, a latecomer to the AI party, with only three percent growth expected.
The iPhone maker, which releases its results on August 1, unveiled its new Apple Intelligence system only last month and plans to roll it out gradually over the next months, and only on the latest models.
CFRA analyst Angelo Zino believes that the impact of these new features will not be felt until the iPhone 16 launches in September, the first to feature the new AI powers built-in across all options.
But he expects Apple's upcoming earnings to show improvement in China sales, a black spot since last year.
"Apple’s forecasts for the current quarter will be important" in assessing the company's momentum, said Zino.
But "if there's one that we were maybe a little bit more concerned about, versus the others, it would be Meta," he said.
He pointed out that Mark Zuckerberg's company raised its investment projections last April as it devoted a few billion dollars more on the chips, servers and data centers needed to develop generative AI.
CFRA expects Meta's growth to decelerate through the end of the year. Combined with the expected increase in spending on AI, that should put earnings under pressure.
As for the earnings of cloud giants Microsoft (July 30) and Amazon (August 1), "we expect them to continue to report very good results, in line with or better than market expectations," said Zino.
'Crucial' bet
Microsoft is among the best positioned to monetize generative AI, having moved the fastest to implement it across all its products, and pouring $13 billion into OpenAI, the startup stalwart behind ChatGPT.
Winning the big bet on AI is "crucial" for the group, said Jeremy Goldman of Emarketer, "but the market is willing to give them a level of patience."
The AI frenzy has helped Microsoft's cloud computing business grow in the double digits, something that analysts said could be hard to sustain.
"This type of growth cannot hold forever, but the synergies between cloud and AI make it more likely that Microsoft holds onto reliable cloud growth for some time to come," Goldman said.
As for Amazon, "investors will want to see that the reacceleration of growth over the first quarter wasn’t a one-off" at AWS, the company’s world-leading cloud business, said Matt Britzman of Hargreaves Lansdown.
Since AWS leads "in everything data-related, it should be well placed to capture a huge chunk of the demand coming from the AI wave," he added.

The picture "might be a little less clear" for Google parent Alphabet, which will be the first to publish results on Tuesday, "because of their search business" online, warned Zino.
"Skepticism around AI Overviews," introduced by Google in mid-May, "is certainly justified," said Emarketer analyst Evelyn Mitchell-Wolf.
This new feature, which offers a written text at the top of results in a Google search, ahead of the traditional links to sites, got off to a rocky start.
Internet users were quick to report strange, or potentially dangerous, answers proposed by the feature that had been touted by Google executives as the future direction of search.
According to data from BrightEdge, relayed by Search Engine Land, the number of searches presenting a result generated by AI Overviews has plummeted in recent weeks as Google shies away from the feature.
Still, many are concerned about the evolution of advertising across the internet if Google pushes on with the Overviews model, which reduces the necessity of clicking into links. Content creators, primarily the media, fear a collapse in revenues.
But for Emarketer's Mitchell-Wolf, "as long as Google maintains its status as the default search engine across most smartphones and major browsers, it will continue to be the top destination for search, and the top destination for search ad spending."