Look out, Super Micro investors, as Dell begins to establish itself as a major AI player in the computer server and storage market.
On Thursday, Dell Computer Inc. DELL,
Its quarterly results also overshadowed another competitor, Hewlett Packard Enterprise Co. HPE.
With optimistic comments about the AI-related demand the company is witnessing. Dell said it now expects a 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 Clark and Chief Financial Officer Yvonne McGill spent much of their time on the earnings call answering analyst questions about the strength of demand for artificial intelligence and what products are impacting it. Or it will affect you moving forward.
“The demand for the computational components to do AI is outpacing the supply picture,” Clark told analysts. “And frankly, it's refreshing to see that we have a high-growth category here. And that growth is definitely happening in the public cloud, but it's increasingly happening in enterprise… and I think it's a huge opportunity for us.”
In its fiscal fourth quarter, Dell said it shipped $800 million worth of AI-optimized servers, which Bernstein Research analyst Tony Sacconaghi noted was still less than 5% of the company's total revenue. He expressed concern about the company's expectations of lower profit margins in the fiscal first quarter, due in large part to its AI servers. Dell said this was due to product shifts in the quarter, such as the adoption of Nvidia Corp. New NVDA,
H200 and AMD chipsets from Advanced Micro Devices Inc.
New MI300X chips.
McGill also cited inflationary component costs and a tougher competitive environment.
Dell's competitors include Super Micro Computer Inc. SMCI,
Which gained share in the server market last year as it focused on the needs of data center customers and hyperscalers of artificial intelligence, and offered product differentiation in low-margin businesses such as liquid cooling, a feature once only used 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 liquid cooling won't be needed yet until customers start using Nvidia's H200 chips, but the power management issue represents an opportunity for Dell to “showcase its architecture and how fast we can move,” liquid cooling performance at scale. . Dell also said AI will provide opportunity for its services business, helping customers deploy AI on its way into its storage business.
In contrast, Hewlett-Packard Enterprise saw a sharp decline in its networking business, sending its shares down 4% in after-hours trading on Thursday. HPE also said it did not obtain sufficient supplies of GPU chips for its AI servers, which affected its results. It has a backlog of $3 billion in GPU orders, and its pipeline is much higher than that.
However, HPE was beset by a significant 14% decline in total revenue, driven largely by its networking business, and one analyst wondered if that was due in part to customer churn ahead of its $14 billion acquisition of Juniper Networks Inc. GNPR,
HPE CEO Antonio Neri said the company has not lost any customers due to the pending Juniper deal.
Dell clearly had a more optimistic view and outlook, as the AI boom began to trickle down from chips to the server hardware embedded within them. Super Micro investors should be aware and start paying attention, because Dell is clearly on its heels.
