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Dell Raises Forecasts as Demand Surges for Nvidia Powered AI Servers 

The logo of Dell Technologies at the Milipol Paris in Villepinte near Paris, France, November 15, 2023. (Reuters)
The logo of Dell Technologies at the Milipol Paris in Villepinte near Paris, France, November 15, 2023. (Reuters)
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Dell Raises Forecasts as Demand Surges for Nvidia Powered AI Servers 

The logo of Dell Technologies at the Milipol Paris in Villepinte near Paris, France, November 15, 2023. (Reuters)
The logo of Dell Technologies at the Milipol Paris in Villepinte near Paris, France, November 15, 2023. (Reuters)

Dell Technologies raised its annual revenue and profit forecasts on Thursday, buoyed by demand for its AI-optimized servers that are powered by Nvidia's powerful chips, sending its shares up about 3% in extended trading.

Dell's infrastructure solutions group, which includes Nvidia-powered servers, surged 38% to a record revenue of $11.65 billion in the second quarter.

The company's servers are engineered to handle AI systems' intense computational demands, including training large language models.

"Enterprise remains a significant opportunity for us, as many are still in the early stages of AI adoption," Chief Operating Officer Jeff Clarke said in a post-earnings call.

Clarke said that Dell sees an emerging opportunity in "sovereign AI" by leveraging the company's strong relationships with governments globally.

Nvidia on Wednesday said nations building AI models in their own languages were turning to its chips, and that this would contribute about low double-digit billions to its revenue in the financial year ending in January 2025.

Nvidia CEO Jensen Huang called out the partnership with Dell earlier this year, saying they were helping businesses create their own "AI factories."

Dell's stock has risen 45% this year.

Dell said on Thursday it now expects annual revenue outlook to be between $95.5 billion and $98.5 billion, up from $93.5 billion and $97.5 billion previously. It also raised its annual adjusted profit per share forecast to $7.80, plus or minus 25 cents.

Demand for its AI-optimized servers rose about 23% sequentially to $3.2 billion in the second quarter. The backlog for these AI servers was $3.8 billion.

"Our pipeline has grown to several multiples of our backlog," Clarke said in a statement.

Revenue for the second quarter ended Aug. 2 rose about 9% to $25.03 billion, beating analysts' average estimate of $24.14 billion, according to LSEG data. It reported adjusted profit per share of $1.89 per share, compared with estimates of $1.71 per share.

While AI server demand soared, Dell's PC business struggled, losing market share to rivals. However, a strong refresh cycle for

AI PCs are expected next year after Microsoft ends support for Windows 10.

Revenue for the client solutions group - home to PCs - fell about 4% to $12.41 billion.

"Dell lost PC shipment shares in key markets in the second quarter. It is the top vendor in the US business market, but its competitors have shown growth and gained more shares than they did a year ago," said Mikako Kitagawa, director analyst at Gartner.

The company took a $328 million charge for workforce reductions in the second quarter.

Separately, Reuters exclusively reported earlier on Thursday that Dell is again exploring a possible sale of cybersecurity firm SecureWorks, following previous unsuccessful attempts to find a buyer.

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Latest US Strike on China's Chips Hits Semiconductor Toolmakers

Flags of China and US are displayed on a printed circuit board with semiconductor chips, in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration/File Photo
Flags of China and US are displayed on a printed circuit board with semiconductor chips, in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration/File Photo
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Latest US Strike on China's Chips Hits Semiconductor Toolmakers

Flags of China and US are displayed on a printed circuit board with semiconductor chips, in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration/File Photo
Flags of China and US are displayed on a printed circuit board with semiconductor chips, in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration/File Photo

The United States on Monday launched its third crackdown in three years on China's semiconductor industry, curbing exports to 140 companies including chip equipment maker Naura Technology Group, among other moves.

The effort to hobble Beijing's chipmaking ambitions also hits Chinese chip toolmakers Piotech and SiCarrier Technology with new export restrictions as part of the package, which also takes aim at shipments of advanced memory chips and more chipmaking tools to China.

The move is one of the Biden administration's last large-scale efforts to stymie China's ability to access and produce chips that can help advance artificial intelligence for military applications, or otherwise threaten US national security.

It comes just weeks before the swearing-in of Republican former president Donald Trump, who is expected to retain many of Biden's tough-on-China measures, according to Reuters.

The package includes curbs on China-bound shipments of high bandwidth memory (HBM) chips, critical for high-end applications like AI training; new curbs on 24 additional chipmaking tools and three software tools; and new export curbs on chipmaking equipment made in countries such as Singapore and Malaysia.

Commerce Secretary Gina Raimondo said the action aims to prevent "China from advancing its domestic semiconductor manufacturing system, which it will use to support its military modernization."

Reuters first reported many companies involved and key details of the plan.

The tool controls will likely hurt Lam Research, KLA and Applied Materials, as well as non-US companies like Dutch equipment maker ASM International .

Among Chinese companies facing new restrictions are nearly two dozen semiconductor companies, two investment companies and over 100 chipmaking tool makers.

The companies include Swaysure Technology Co, SiEn Qingdao, and Shenzhen Pensun Technology Co, work with China's Huawei Technologies, the telecommunications equipment leader once hobbled by US sanctions and now at the center of China's advanced chip production and development.

They will be added to the entity list, which bars US suppliers from shipping to them without first receiving a special license.

Asked about the US curbs, Chinese foreign ministry spokesman Lin Jian said such behaviour undermined the international economic trade order and disrupted global supply chains.

China will take measures to safeguard the rights and interests of its firms, he added at a regular press briefing on Monday.

The Chinese commerce ministry did not immediately respond to a request for comment.

China has stepped up its drive to become self-sufficient in the semiconductor sector in recent years, as the US and other countries have restricted exports of the advanced chips and the tools to make them. However, it remains years behind chip industry leaders like Nvidia in AI chips and chip equipment maker ASML in the Netherlands.

The US also is poised to place additional restrictions on Semiconductor Manufacturing International, China's largest contract chip manufacturer, which was placed on the Entity List in 2020 but with a policy that allowed billions of dollars worth of licenses to ship goods to it to be granted.

For the first time, the US will add three companies that make investments in chips to the entity list. Chinese private equity firm Wise Road Capital, tech firm Wingtech Technology Co and JAC Capital because of their role "in aiding China’s government’s efforts to acquire entities with sensitive semiconductor manufacturing capability critical to the defense industrial bases of the United States and its allies with the objective of relocating these entities to China."

Companies seeking licenses to ship to firms on the Entity List generally get denied.

DUTCH AND JAPANESE EXEMPTED

An aspect of the new package that addresses the foreign direct product rule could hurt some US allies by limiting what their companies can ship to China.

The new rule will expand US powers to curb exports of chipmaking equipment by US, Japanese, and Dutch manufacturers made in other parts of the world to certain chip plants in China.

Equipment made in Israel, Malaysia, Singapore, South Korea and Taiwan is subject to the rule while Japan and the Netherlands will be exempt.

The expanded foreign direct product rule will apply to 16 companies on the entity list that are seen as the most important to China's most advanced chipmaking ambitions. The rule will also lower to zero the amount of US content that determines when certain foreign items are subject to US control. That will allow the US to regulate any item shipped to China from overseas if it contains any US chips.

The new rules are being released after lengthy discussions with Japan and the Netherlands, which, along with the United States, dominate the production of advanced chipmaking equipment.

The United States plans to exempt countries that adopt similar controls, the people said.

Another rule in the package restricts memory used in AI chips that correspond with what is known as "HBM 2" and higher, technology made by South Korea's Samsung and SK Hynix and US-based Micron.

Industry sources expect only Samsung Electronics to be affected. Analysts estimate Samsung generates about 30% of its HBM chip sales from China.

The latest rules are the third major package of chip-related export curbs on China adopted under the Biden administration.

In October 2022, the United States published a sweeping set of controls on sale and manufacture of certain high-end chips that was considered to be the biggest shift in its tech policy toward China since the 1990s.