Dell's Stock is Climbing to Its Best Day Ever - and Boosting Nvidia and Amd Shares at the Same Time

Dell Technologies Inc. is experiencing a resurgence in popularity, emerging as a beneficiary of the artificial intelligence (AI) trend that has propelled shares of chip giants like Nvidia Corp. and Advanced Micro Devices Inc. over the past year.

‍

The focus on AI investments with positive financial outcomes has led Wall Street to seek companies reaping the rewards of increased spending in their financial results. Dell is evidently in that category, as it revealed $800 million in shipments of AI-optimized servers for the latest quarter, with orders surging by almost 40% sequentially.

‍

Raymond James analyst Simon Leopold noted Dell's robust AI momentum over several quarters, coupled with healthy backlog growth, solidifying the company's AI credibility. Leopold, expressing confidence in Dell's future, raised the stock's price target to $120 from $82 and maintained an outperform rating.

‍

In morning trading on Friday, Dell shares surged nearly 27%, poised for their largest single-day percentage gain on record, according to FactSet data dating back to 2016.

‍

Analyst Ben Reitzes from Melius Research likened Dell's server business to "razors" that serve as a foundation for other revenue streams like storage, software, services, and financing. While AI razors (servers) may have lower gross margins than traditional servers, they drive additional sales of higher-margin components, making Dell's server commentary pivotal for its overall performance.

‍

Reitzes also highlighted positive signals for AMD and Nvidia in Dell's report. He emphasized the impact on AMD's margins, as traditional server central processing units (CPUs) gain traction, supporting AMD's data-center segment. Furthermore, Reitzes suggested that Dell received meaningful orders for AMD's MI300X chip, which is expected to start shipping this quarter and ramp up throughout the year. He maintains a buy rating and a $152 target price on Dell's stock.

‍

Describing Dell as the "Swiss Army knife" of generative AI, Mizuho analyst Jordan Klein noted that the company builds AI performance servers running on graphics processing units from both Nvidia and AMD. Klein emphasized Dell's expertise, expansive capabilities, and unparalleled relationships in the enterprise sector.

‍

Klein highlighted Dell's impressive $2.9 billion AI backlog, expecting it to continue growing. However, he noted that lead times are decreasing, allowing Dell to convert this backlog into revenue more rapidly and creating better opportunities for upside on a quarter-to-quarter basis.

‍

Regarding AMD, Klein believes Dell's commentary is positive for the company and could even benefit Intel Corp. He explained that while AMD has seen strength in its new higher-performance Genoa CPU due to cloud demand, Intel is struggling with lower volumes and a lagging product cycle, hoping to rectify the situation in 2024.

‍

In Friday morning trading, AMD's stock rose by 2.7%, Intel's increased by 0.8%, and Nvidia's was up by 1.9%. Dell's robust performance and growing presence in the AI space position it as a notable player alongside chip giants in this evolving technological landscape.

‍