Super Micro investors, take note as Dell begins to establish itself as a major artificial intelligence player in the computer server and storage market.
Chief Operating Officer Jeff Clark and Chief Financial Officer Yvonne McGill were on hand to answer analyst questions on the earnings call about the strength of demand for AI and what products it is impacting. The company’s stock price rose 19% in after-hours trading as the company’s stock price rose 19% in after-hours trading. or may affect the future.
“Demand for the computational components to run AI continues to outstrip supply,” Clark told analysts. “And, frankly, it’s refreshing to have a high-growth category here. That growth is certainly happening in the public cloud, but increasingly in the enterprise. I think it’s a great opportunity.”
Dell announced it shipped $800 million in AI-optimized servers in its fiscal fourth quarter, but Bernstein Research analyst Toni Sacconaghi said this amounted to 5% of the company’s total revenue. He pointed out that this was not enough. He expressed concern about the company’s outlook for lower profit margins in the first quarter, primarily due to AI servers. Dell said this was due to product transitions in the quarter, including the new Nvidia Corp. hire.
NVDA
H200 chip and Advanced Micro Devices Inc.
AMD
New MI300X chip.
McGill also cited rising component costs and an increasingly competitive environment.
Dell’s competitors include Super Micro Computer Inc.
SMCI
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Over the past year, we’ve focused on the AI needs of data center and hyperscaler customers and provided product differentiation in low-margin businesses such as liquid cooling, a feature once reserved for the server market. We have gained a share in the server market. High-performance supercomputers for cooling servers running compute-intensive graphics chips such as Nvdia.
Also read: Supermicro’s stock price may perfectly reflect the AI boom.
Dell said liquid cooling isn’t needed yet until customers start using Nvidia’s H200 chips, but the power management issue is an opportunity for Dell to “show off our engineering and how quickly we can react.” He said that there is. Liquid cooling is carried out on a large scale. Dell also said that AI will create opportunities for its services business and, in the future, for its storage business as it helps customers adopt AI.
By contrast, Hewlett Packard Enterprise saw a significant decline in its networking business, with its stock falling 4% in after-hours trading on Thursday. HPE also said that insufficient supply of GPU chips for AI servers weighed on its results. The company’s GPU backlog is $3 billion, with much more in the pipeline.
Still, HPE was saddled with a significant 14% decline in total revenue, largely due to its network business, which led one analyst to predict that it would refrain from its $14 billion acquisition of Juniper Networks. They question whether customer suspensions may be a contributing factor.
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HPE CEO Antonio Neri said the company is not losing customers as a result of the pending Juniper deal.
As the AI boom began to narrow down from chips to the server hardware they were built into, Dell clearly had a more bullish judgment and outlook. Super Micro investors need to realize that Dell is clearly following suit and start paying attention.
