Dell shares rise on optimism that there are big orders for AI servers

Dell shares rose more than 11% on Wednesday to an all-time high after Morgan Stanley raised its price target and predicted the company would gain sales from voracious demand for artificial intelligence servers.

Dell sees accelerating momentum, especially in winning business building artificial intelligence servers, unlocking a new bull for the stock, Morgan Stanley analyst Eric Woodring wrote in a note on Wednesday. He raised his price target for Dell from $128 per share to $152 per share and called it a top pick.

“Overall, we’re hearing more AI server momentum at Dell than at any other OEM,” Woodring wrote, saying he expects about $10 billion in AI server revenue in the company’s 2025 fiscal year — which ends next February .

Wednesday’s move was the biggest since March 1, when shares jumped after earnings showed the PC maker benefited from the AI ​​boom.

Dell shares are already up more than 99% in 2024, trailing rival AI server maker’s 233% gain Super micro computer but superior Hewlett Packard Enterprise6% gains this year.

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

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

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

“Michael [Dell] is here and he will gladly accept your order,” Huang continued.

“While the near-exponential growth 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 those reasons are the growing demand for AI servers and that it models Dell’s growing market share.

He wrote that Dell may be able to improve sales to its customers and “attach” additional hardware such as data storage.

Dell is expected to announce its April quarter earnings on May 30. Nvidia reports earnings for the quarter ending in April on May 22.

Dell’s other business, making PCs for consumers and businesses running Microsoft Windows, could get a boost next week when Microsoft unveils new capabilities at its conference, including long-awaited AI features that many analysts expect to boost demand for new PCs.

PC sales fell for two years in a post-pandemic hangover as consumers and businesses who bought new machines in 2020 and 2021 pushed back the schedule for their next upgrades.

But the PC industry is on track to grow again and is beating downbeat expectations, Woodring wrote, which will benefit Dell.

“We remain bullish on the recovery of the PC market as not only are we hearing upgrade/refresh demand in our recent CIO and VAR checks, but we are also seeing upward revisions to notebook ODM builds in recent months,” Woodring wrote .