2024-05-31 10:12:14 ET
Summary
- Dell is experiencing strong demand for AI-optimized servers, with customer demand nearly doubling sequentially.
- The company has a multi-billion dollar sales pipeline for AI servers and a significant backlog, indicating high demand.
- However, Dell's AI business presents a few operating issues, which should not be overlooked.
- In this article, we look at Dell's Q1 FY25 earnings report to understand why the stock sold off.
Dell Is Catching Investors' Attention
Dell ( DELL ) was one of my top three picks for 2024 and among these three, it has been by far the best-performing one having returned over 100% in these few months.
To be honest, the reason why I turned bullish on Dell hasn't materialized yet. In fact, I was convinced - and am still - that 2024 would be the starting year of a new PC replacement cycle after the Covid-related cycle. After all, PCs are an essential productivity tool - a real staple nowadays - and businesses can't just endlessly postpone their replacement. While this trend has not picked up strength so far, there is more and more data hinting that we should see it soon. In the meantime, however, investors have pushed Dell up due to other AI-related reasons we will see in a moment. In this article, I want to go over Dell's case. On one side, we have to understand what is happening with Dell and AI; on the other, I have reasons to believe there is still the PC replacement cycle tailwind to be unleashed and that could push the stock up even more....
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For further details see:
The AI Effect And Its Issues: A Review Of Dell's Earnings