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Dell stock jumps 9% on company’s optimism about big AI server orders

Michael Dell, Chairman and CEO of Dell Technologies, speaks during Mobile World Congress 2024 in Barcelona, ​​Spain, February 27, 2024.

Jeanne Cros | Nuphoto | Getty Images

Dell shares rose more than 9% Wednesday to an all-time high after Morgan Stanley raised its price target and predicted the company would reap sales from insatiable demand for artificial intelligence servers.

Dell is seeing momentum pick up, including winning contracts to build AI servers, paving the way for the stock to move higher, Morgan Stanley analyst Erik Woodring wrote in a note Wednesday. He raised his price target on Dell from $128 per share to $152 per share and called it a top pick.

“Overall, we are hearing about greater momentum in AI servers at Dell than at any other OEM,” Woodring wrote, saying he projects about $10 billion in revenue for AI servers. AI servers during the company’s 2025 fiscal year, which ends next February.

Wednesday’s move was the biggest since March 1, when the stock jumped after results showed the computer maker benefited from the AI ​​boom.

Dell shares are now up more than 95% in 2024, behind the 220% gain by the rival AI server maker. Super microcomputer but exceeding Hewlett Packard CompanyGains of 5% this year.

Most AI servers are built around Nvidia’s chips, which have become popular in the tech industry as they are used to deploy advanced AI models from companies like GoogleOpenAI and Meta. Dell sells servers using the latest Nvidia AI chips, including its H100 GPU and the latest Blackwell generation chips.

HAS NvidiaAt the annual conference in March, Nvidia CEO Jensen Huang appeared to send customers who want the latest AI chips to Dell for orders.

“You’re going to need an AI factory,” Huang said. “And no one is better than Dell at building end-to-end, hyper-scale systems for businesses.”

“Michael (Dell) is here and he’s happy to take your order,” Huang continued.

“While the near-exponential increase in Nvidia GPU shipments and AI server builds makes it difficult to determine exact growth rates,” Woodring wrote, he has confidence in Dell’s business for a variety of reasons. Among these reasons are the growing demand for AI servers and the fact that it models Dell’s increasing market share.

He wrote that Dell might be able to sell to its customers and “plug in” additional hardware, such as data storage.

Dell is expected to announce its April quarter results on May 30. Nvidia will report results for its April-ending quarter on May 22.

Dell’s other business, building PCs for home and business users running Microsoft Windows, could see a boost next week when Microsoft unveils new capabilities at its conference, including long-awaited AI features that, many analysts believe will drive demand for new PCs.

PC sales have fallen for two years post-pandemic as consumers and businesses that purchased new machines in 2020 and 2021 pushed back the timing of their next upgrades.

But the PC industry is poised to grow again and exceed expectations, Woodring wrote, which will benefit Dell.

“We remain optimistic about the recovery of the PC market as we are not only hearing about upgrade/refresh requests in our recent CIO and VAR checks, but we are also seeing upward revisions in laptop ODM versions over the past few months,” Woodring wrote.

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