By Callum Keown
Dell Technologies stock was set to open at a new record high Friday, but Thursday’s upbeat earnings could also give Nvidia and Advanced Micro Devices, who power its servers, an extra boost.
Dell stock soared 24% to $117 ahead of the open, while Nvidia edged 1% higher and AMD rose 3%.
“While the Nvidia ‘sizzle’ from the Dell call was so obvious, you may not realize how good this Dell quarter was for AMD,” Melius Research analyst Ben Reitzes said in a note Friday. “Traditional server CPUs picking up helps support AMD margins and lends further upside to its data center segment,” he added.
Reitzes said that Intel may also benefit from Dell’s commentary around servers, but that upside from PC sales for the company, and AMD, won’t come along for another few quarters. Melius analysts have a Buy rating on Dell with a price target of $152.
Citi analyst Asiya Merchant also maintained a Buy rating, hiking her price target to $125 from $92, noting that Dell had the potential to gain share in the growing AI market.
“Management’s comments suggest their expansive AI infrastructure and device offerings, coupled with services and support, and relationships across tier-2 cloud providers, government organizations and enterprises position it strongly to grow their overall share of an expanding and growing AI total addressable market,” she said.
The tech equipment maker beat earnings expectations, fueled by a surge in demand for its artificial intelligence servers–its backlog rose to $2.9 billion from $1.6 billion just a quarter ago. Most of its servers are powered by Nvidia H100 chips. Dell is also seeing strong interest in orders of servers equipped with the next generation of AI chips, including AMD’s MI300X and Nvidia’s H200, chief operating officer Jeffrey Clarke said during the company’s earnings call.
Dell reported adjusted earnings per share of $2.20 in the fiscal fourth quarter, beating Wall Street’s expectations of $1.73 per share. Revenue of $22.3 billion narrowly topped estimates.
But it’s the demand for Dell’s AI servers that’s key for investors, and providing another positive for the chip sector.
Write to Callum Keown at callum.keown@barrons.com