Dell, a leading computer-server and storage company, is making waves in the artificial intelligence (AI) industry, challenging its rival Super Micro. In its recent quarterly results, Dell overshadowed another competitor, Hewlett Packard Enterprise (HPE), with its bullish comments about AI-related demand.
Dell’s shares surged by 19% in after-hours trading as the company’s executives highlighted the strength of AI demand and the products it is affecting. Chief Operating Officer Jeff Clarke stated that the demand for computational components for AI exceeds the supply, presenting a significant growth opportunity for Dell. In the fiscal fourth quarter alone, Dell shipped $800 million worth of AI-optimized servers. However, this is still less than 5% of the company’s total revenue, raising concerns about future profit margins.
Dell attributed the projected lower profit margins for the fiscal first quarter to product transitions and inflationary costs for components. The company is adopting new chips from Nvidia and Advanced Micro Devices, which are specifically designed for AI applications. Additionally, Dell faces tough competition in the server market, with Super Micro gaining market share by focusing on the needs of data-center and hyperscaler customers and offering product differentiations such as liquid cooling.
While Dell stated that liquid cooling will not be necessary until customers start using Nvidia’s H200 chips, it sees power management as an opportunity to showcase its engineering capabilities. Dell believes that AI will not only benefit its services business by helping customers deploy AI but also create opportunities for its storage business in the future.
In contrast, HPE experienced a sharp decline in its networking business, which had a negative impact on its stock price. The company also faced supply constraints for GPU chips used in AI servers. Despite having a backlog of $3 billion in GPU orders, HPE’s total revenue declined by 14%, largely due to its networking business. Some analysts questioned whether this decline was influenced by customer hesitation ahead of HPE’s acquisition of Juniper Networks.
In comparison, Dell’s outlook and call were much more positive, reflecting the increasing importance of AI in the industry. As the AI boom extends from chips to server hardware, Dell is positioning itself as a major player. Super Micro investors should take notice of Dell’s momentum and its potential impact on the market.
Dell’s success in the AI industry highlights its commitment to innovation and adaptability. With its ability to capitalize on the growing demand for AI-related products, Dell is poised to challenge its competitors and solidify its position in the market. As the AI revolution continues to unfold, it will be interesting to see how Dell leverages its engineering expertise and expands its presence in the AI industry.
