The proliferation of artificial intelligence (AI) has emerged as a transformative force, revolutionizing industries and reshaping the competitive landscape. Among the companies poised to reap substantial benefits from this technological wave is Dell Technologies (NYSE: DELL), whose shares have experienced a remarkable surge in value over the past year. This surge reflects investors’ keen anticipation of Dell’s potential to leverage AI-driven opportunities for growth and innovation.
Dell’s impressive ascent can be attributed to its strategic positioning within two key sectors ripe for AI integration: servers and personal computers (PCs). In both arenas, recent developments underscore Dell’s proactive stance in harnessing AI to drive business expansion and enhance competitiveness.
One significant driver of Dell’s growth story is the soaring demand for AI-optimized servers. During its fiscal 2024 fourth-quarter earnings report, Dell highlighted a substantial uptick in orders for its AI-focused servers, with a remarkable 40% increase compared to the previous quarter. This surge in demand propelled Dell’s backlog of AI server orders to nearly double, reaching an impressive $2.9 billion. Given the projected exponential growth of the AI server market — forecasted to reach $33 billion in revenue by 2024, according to IDC — Dell stands poised to capitalize on this burgeoning market opportunity.
A pivotal move signaling Dell’s commitment to the AI server market is its strategic partnership extension with AI chip leader Nvidia. By offering server solutions optimized for Nvidia’s next-generation Blackwell AI graphics processing units (GPUs), Dell aligns itself with a leading player in AI chip technology. Moreover, Dell’s introduction of liquid-cooled server offerings addresses the escalating demand for efficient data center cooling solutions, anticipated to witness robust growth in the coming years.
In addition to the AI server segment, Dell recognizes the transformative potential of AI in the PC market. Despite recent challenges stemming from soft demand for PCs, Dell remains optimistic about the prospects for AI-enabled PCs to catalyze a market turnaround. With AI PC shipments projected to grow at an impressive annual rate of 44% through 2028, Dell’s unveiling of a new portfolio of PCs with on-device AI features positions it favorably to capitalize on this burgeoning trend.
Financially, Dell’s earnings witnessed a modest decline of 6% in fiscal 2024, amounting to $7.13 per share. However, analysts anticipate a return to growth in the current fiscal year, followed by robust expansion in subsequent years. Trading at a forward earnings multiple of 20, a discount compared to the Nasdaq-100’s forward earnings multiple of 27, Dell appears attractively valued given its promising growth prospects in the AI space.
In conclusion, Dell’s strategic positioning, innovative product offerings, and strategic partnerships underscore its potential to thrive in the AI-driven era. As the market continues to recognize Dell’s prowess in leveraging AI for business growth and technological advancement, investors may continue to benefit from its impressive stock market rally.