Attention, Super Micro investors, as Dell is starting to solidify itself as a major AI player in the server and storage market.
Thursday, Dell Computer Inc. DELL,
and its quarterly results also overshadowed another rival, Hewlett Packard Enterprise Co. HPE,
with bullish comments on the AI demand the company is seeing. Dell said it now expects to return to revenue growth in fiscal 2025, albeit at a low single-digit rate.
The company’s shares rose 19% in after-hours trading, as Chief Operating Officer Jeff Clarke and Chief Financial Officer Yvonne McGill spent much of their time fielding analyst questions about the strength of demand for artificial intelligence and what products is affecting. or it will affect the future.
“The demand for computational components for artificial intelligence outstrips the supply picture,” Clarke told analysts. “And frankly it’s nice to see that we have a strong growing category here. This growth is certainly happening in the public cloud, but increasingly in the enterprise… I think it’s a great opportunity for us.”
In its fiscal fourth quarter, Dell said it shipped $800 million worth of AI-optimized servers, which Bernstein Research analyst Toni Sacconaghi said still represents less than 5% of the company’s total revenue. He expressed concern about the company’s forecast of lower profit margins in the fiscal first quarter, due largely to AI servers. Dell said this was due to product transitions that occurred in the quarter, such as the adoption of the new Nvidia Corp. NVDA,
H200 and AMD chips from Advanced Micro Devices Inc.,
new MI300X chips.
McGill also cited inflationary costs for components and a tougher competitive environment.
Among Dell’s competitors is Super Micro Computer Inc. SMCI,
which has gained share in the server market over the past year by focusing on the needs of data center and hyperscaler customers for AI and offering product differentiation in a low-margin business such as liquid cooling, a feature once used only in high-performance supercomputers, to cool servers running compute-intensive graphics chips from Nvdia and others.
Read also: Super Micro’s stock price may fully reflect the AI boom.
Dell, for its part, said that liquid cooling won’t be necessary yet until customers start using Nvidia’s H200 chips, but that the power management issue is an opportunity for Dell to “showcase its engineering and how fast we can move,” to make liquid cooling work on a large scale. Dell also said AI will bring opportunities to its services business as it helps customers implement AI and down the road to its storage business.
Hewlett-Packard Enterprise, in contrast, reported a sharp decline in its networking business, which dragged its shares down 4% in after-hours trading on Thursday. HPE also said it did not receive a sufficient supply of GPU chips for AI servers, which weighed on its results. It has a backlog of $3 billion in GPU orders and its pipeline is well above that figure.
Even so, HPE is reeling from a steep 14% decline in total revenue, fueled largely by its networking business, and one analyst questioned whether it was partly due to a customer pause ahead of the $14 billion acquisition of dollars of Juniper Networks Inc. JNPR,
HPE CEO Antonio Neri said the company has not lost any customers due to the pending deal with Juniper.
Dell clearly had the more optimistic vision and outlook, as the AI boom begins to filter down from chips to the server hardware they’re integrated into. Super Micro investors should be aware and start paying attention, because Dell is clearly on its tail.