Dell Technologies Shares Surge 4% Following Strong AI Server Demand and Raised Forecasts

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Dell Technologies (DELL.N) saw its shares increase by 4% on Friday, driven by robust demand for its artificial intelligence (AI)-powered servers. The surge in interest prompted the company to revise its full-year earnings and revenue projections upwards.

Dell, a major supplier of servers and related infrastructure to enterprises, has significantly bolstered its AI capabilities through a strategic partnership with chip industry leader Nvidia (NVDA.O). This collaboration, established earlier this year, has enabled Dell to attract mid-sized businesses looking to upgrade their servers with advanced AI functionalities.

According to Bernstein analysts, the company’s impressive financial performance was largely driven by the strong sales of AI servers. However, revenue from its storage and personal computer (PC) segments fell short of market expectations. Bernstein noted that 80% to 90% of Dell’s server clients are tier 2 cloud services providers, and Dell is actively pursuing competitive bids against rivals such as Super Micro Computer (SMCI.O).

Dell’s Infrastructure Solutions Group, which encompasses server sales, experienced a remarkable 38% revenue increase year-over-year in the second quarter. The demand for AI-optimized servers, including the flagship PowerEdge XE9680, surged 23% sequentially, reaching $3.2 billion, as reported by the company on Thursday.

The company’s AI pipeline has also seen substantial growth, now estimated at $11 billion to $13 billion, a significant increase from the $8 billion to $10 billion forecasted in the first quarter, according to Bernstein.

Dell reported earnings of $1.89 per share on an adjusted basis, with revenue totaling $25.03 billion. Both figures exceeded the estimates provided by LSEG. Following these results, at least three brokerage firms have raised their price targets for Dell’s stock. The median target price now stands at $155, with 19 out of 22 analysts rating the stock as “buy” or higher, according to LSEG data.

Despite the recent positive performance and forecast upgrades, Dell’s stock remains down by 36% from its all-time high of $180 reached in May, currently trading at $115.

This uptick in Dell’s stock reflects strong market confidence in its AI server business and positive revisions in its financial outlook, marking a notable shift in the company’s trajectory as it continues to navigate the competitive landscape of AI and server technologies.