Tag: Dell Technologies Inc. (DELL)

Palantir Joins the S&P 500: Is It Time to Buy Before the AI Surge?

Posted on by The INO.com Team

Palantir Technologies Inc. (PLTR) is set to join the S&P 500 index on September 23, 2024, alongside Dell Technologies Inc. (DELL) and Erie Indemnity Co. (ERIE), in the latest quarterly rebalancing by S&P Dow Jones Indices. Being included in the S&P 500 will likely enhance Palantir’s visibility and appeal to a broad range of institutional investors.

The inclusion in the S&P 500 will mark a significant milestone for PLTR, a data analytics and artificial intelligence (AI) leader. But the question now arises: is this the right time to buy Palantir stock, especially with the growing momentum around AI technology?

Palantir’s AI Growth Potential

PLTR’s solid position in the AI space makes it a compelling investment opportunity. The company has long been a leader in data analytics, working with government agencies, defense contractors, and large enterprises. With the recent AI boom, Palantir’s capabilities in machine learning (ML), predictive analytics, and AI-driven systems are more relevant than ever.

Recently, PLTR was recognized as a leader in AI/ML software platforms by renowned research and advisory firm Forrester. Palantir AI platform (AIP) offers an end-to-end architecture that powers real-time, AI-driven decision-making. With Palantir Foundry and Palantir Apollo, AIP forms the foundation of the “AI Mesh” architecture, which is becoming the benchmark for enterprises aiming to deliver composable, interoperable, and scalable value through AI.

From public health initiatives to battery production, organizations rely on Palantir to safely, securely, and effectively leverage AI — driving tangible operational outcomes across industries.

Grand View Research report suggests that the global AI market was valued at $196.63 billion in 2023 and is expected to grow at a CAGR of 36.6% from 2024 to 2030. PLTR’s specialized AI software platforms make it a key player in this rapidly expanding market.

Strategic Partnerships and Investments

This month, Palantir and bp p.l.c. (BP) announced an enterprise agreement that will extend their strategic relationship and introduce new AI capabilities with PLTR’s AIP software. The new contract will expand upon a decade of close collaboration, which has established a strong foundation for BP’s oil and gas production operations, utilizing Palantir’s industry-leading software.

Also, on August 8, PLTR and Microsoft Corporation (MSFT) announced a major enhancement to their partnership, aiming to deliver advanced and secure cloud, AI, and analytics capabilities to the U.S. Defense and Intelligence Community.

This first-of-its-kind, integrated suite of technology will enable critical national security missions to leverage Microsoft’s top-tier Large Language Models (LLMs) through Azure OpenAI (AOAI) Service within Palantir’s AI Platform (AIP) within Microsoft’s government and classified cloud environments. Through this collaboration, Palantir will deploy its suite of products – Foundry, Gotham, Apollo, and AIP – in Microsoft Azure Government and the Azure Government Secret (DoD Impact Level 6) and Top Secret clouds.

AI Momentum Lifted Sales and Guidance

PLTR generated $678.13 million in revenue for the second quarter that ended June 30, 2024, up 27.1% from the prior year’s quarter. That is compared to the consensus revenue estimate of $652.42 million. The company’s U.S. commercial revenue grew 55% year-over-year to $159 million, and its U.S. government revenue increased 24% year-over-year to $278 million.

The software company’s adjusted income from operations was $253.57 million, an increase of 87.8% from the prior year’s period. PLTR’s adjusted EBITDA rose 82.4% year-over-year to $261.62 million. Further, its adjusted free cash flow grew 54.8% from the year-ago value to $148.66 million.

Palantir posted a net income of $134 million for the second quarter, the largest quarterly profit in the company’s twenty-year history. Its adjusted EPS came in at $0.09, an increase of 80% year-over-year. That surpassed the consensus EPS estimate of $0.08.

Palantir CEO Alex Karp said the outstanding second-quarter results reflected the “unbridled demand for and understanding of the capabilities of our software.” Karp added, “The growth of our business has been re-accelerating steadily, and we see an unprecedented opportunity ahead to capture and build on that momentum.”

Amid the AI boom, the management raised full-year revenue guidance. For the third quarter of 2024, PLTR expects revenue of between $697-$701 million. The company’s adjusted income from operations is expected to be $233 million to $237 million.

For the full year 2024, the enterprise software company raised its revenue guidance to between $2.742-$2.750 billion. Palantir also increased its U.S. commercial revenue guidance to in excess of $672 million, representing a growth rate of at least 47%. Also, the company raised its guidance for adjusted income from operations to between $966-$974 million.

Bottom Line

PLTR’s inclusion in the S&P 500 index marks a significant milestone for the company, enhancing its visibility and appeal among institutional investors. This move, combined with Palantir’s strong foothold in the rapidly growing AI sector, positions it for further growth. The software giant’s innovative platforms like AIP, Foundry, and Apollo place it at the forefront of AI-driven transformations across industries.

The combination of Palantir’s expanding partnerships, increased revenue guidance, and impressive financial performance makes it an attractive investment. The stock has skyrocketed more than 112% year-to-date and around 128% over the past year, driven by surging demand for its AI-driven software platforms. Further, analysts issued a bullish outlook for Palantir.

BofA Securities analyst Mariana Perez maintained a Buy rating on PLTR and raised the price target on the stock from $30 to $50. Moreover, Daniel Ives from Wedbush maintained an Outperform rating on Palantir, with a price target of $38.

So, if you're looking to capitalize on the current AI boom, PLTR’s sound fundamentals and promising long-term outlook may present a golden opportunity for solid returns.

Why DELL Could Be a Big Winner in the AI Cloud Spending Boom

Posted on by The INO.com Team

As the tech world grapples with the ebb and flow of generative AI hype, one thing remains clear: the major players are doubling down on their investments. Despite a nearly 15% drop in the Nasdaq since July’s highs and concerns about a potential repeat of the dot-com bubble, the tech giants aren’t flinching.

The second-quarter earnings season revealed that major technology companies like Amazon.com, Inc. (AMZN), Microsoft Corporation (MSFT), Alphabet Inc. (GOOGL), and Meta Platforms, Inc. (META) are more bullish than ever, continuing to fuel their AI ambitions with hefty investments. Together, these companies have poured around $40 billion into cloud computing, with a significant portion allocated for GPUs and other AI-related tech.

For example, the partnership between Microsoft and OpenAI has sparked a massive capital expenditure (CAPEX) buildout and triggered a surge in demand for GPUs. So far, enterprise adoption of generative AI has mostly involved exploratory projects within the public cloud.

Following the release of second-quarter results by these tech behemoths, Susquehanna analyst Mehdi Hosseini raised his 2024 global capital expenditure forecast for the top 12 cloud computing providers by 3%, bringing the total to $192 billion, up by 55% from last year. And if that wasn’t robust enough, Hosseini predicts spending will rise by another 40% to 42% in 2025.

Amid this surge in AI investment, Dell Technologies Inc. (DELL) is emerging as an unexpected contender. Traditionally recognized for its personal computing products, Dell is now aggressively expanding its footprint in AI and cloud computing. With the growing need for data centers and advanced cloud solutions, Dell’s strategic shift positions it well to benefit from this boom.

So, could DELL be a major winner in the AI revolution? Let’s find out.

Dell’s Strategic Position in the AI Server Market

Dell Technologies has evolved far beyond its origins as a producer of Windows-powered PCs. While high-end laptops and gaming stations remain significant, Dell’s focus has increasingly shifted toward becoming a leading player in the AI and cloud infrastructure space.

The company’s extensive portfolio includes everything from data centers to edge computing solutions, positioning it as a versatile player in the tech world. DELL’s infrastructure solutions are particularly noteworthy, as they cater to the growing demand for advanced AI computing power. The company has built a strong reputation for assembling efficient, high-performance data centers, a crucial asset as AI and machine learning drive demand for robust computing infrastructure.

Moreover, Dell’s partnerships with major cloud providers and tech giants like NVIDIA Corporation (NVDA) underscore its critical role in the AI ecosystem. NVDA’s endorsement of Dell as a premier solution for building data centers is a testament to its capabilities. The “AI Factory” initiative, highlighted by Nvidia CEO Jensen Huang, marks DELL as a leading player in the transition to AI-accelerated computing environments.

The company’s infrastructure solutions segment, which generated $4.3 billion in operating income last year, stands to benefit immensely from the accelerating demand for advanced AI computing systems. This growth potential is reinforced by the company’s strategic focus on high-performance servers and storage solutions tailored for AI applications.

In the first quarter ended May 3, 2024, DELL’s net revenue increased 6% year-over-year to $22.24 billion, exceeding the analysts’ expectations of $21.65 billion. Its Infrastructure Solutions Group’s (ISG) revenue stood at $9.23 billion, up 22% year-over-year. Thanks to strong demand across AI and traditional servers, the company’s servers and networking revenue grew 42% from the year-ago value to $5.47 billion.

On the bottom line, DELL’s net income and EPS came in at $955 million and $1.32, indicating an increase of 65% and 67% from the prior year. The company returned $1.10 billion to shareholders through share repurchases and dividends, ending the quarter with $7.30 billion in cash and investments.

Dell’s consistent ability to meet or exceed expectations, coupled with its aggressive cash returns to shareholders, has proven to be a winning strategy. This, along with its strong positioning in AI, has driven the stock price to more than double over the past twelve months. Shares of DELL have surged more than 45% year-to-date and nearly 95% over the past year.

As companies invest more in AI computing systems, the company’s infrastructure solutions are expected to see substantial growth. With tens of billions, potentially even hundreds of billions of dollars up for grabs, DELL is well-positioned to capture a significant share of this expanding market. If it continues to leverage its partnerships and infrastructure expertise, it could emerge as a major beneficiary of the AI boom, making it an intriguing stock for investors to consider.

Intel's AI Ambitions: A Strategic Shift Toward Private Data Storage Solutions

Posted on by The INO.com Team

Intel Corporation (INTC), a titan in the world of semiconductors, is navigating a period of transformative change that is revolutionizing its corporate culture and product development. Traditionally, Intel’s core offerings have been microprocessors that serve as the brains of desktop PCs, laptops and tablets, and servers. These processors are silicon wafers embedded with millions or billions of transistors, each acting as binary switches that form the fundamental ‘ones and zeros’ of computer operations.

Today, the thirst for enhanced processing power is insatiable. The proliferation of Artificial Intelligence (AI), which has become integral to essential business operations across almost every sector, exponentially increases the need for robust computing capabilities. AI, particularly neural networks, necessitates enormous computing power and thrives on the collaborative efforts of multiple computing systems. The scope of these AI applications extends far beyond the PCs and servers that initially cemented INTC’s status as an industry leader.

The rapid advancement of AI has prompted Intel to rethink and innovate its chip designs and functionalities. As a result, the company is developing new software and designing interoperable chips while exploring external partnerships to accelerate its adaptation to the evolving computing environment.

Strategic Pivot Toward AI Ecosystem

At Computex 2024, INTC unveiled a series of groundbreaking AI-related announcements, showcasing the latest technologies that merge cutting-edge performance with power efficiency (especially in data centers and for AI on personal computers). The company aims to make AI cheaper and more accessible for everyone.

Intel CEO Pat Gelsinger emphasized how AI is changing the game, stating, “The magic of silicon is once again enabling exponential advancements in computing that will push the boundaries of human potential and power the global economy for years to come.”

In just six months, Intel achieved a lot, transitioning from launching 5th Gen Intel® Xeon® processors to introducing the pioneering Xeon 6 series. The company also previewed Gaudi AI accelerators, offering enterprise clients a cost-effective GenAI training and inference system. Furthermore, Intel has spearheaded the AI PC revolution by integrating Intel® Core™ Ultra processors in over 8 million devices while teasing the upcoming client architecture slated for release later this year.

These strides underscore Intel's commitment to accelerating execution and driving innovation at an unprecedented pace to democratize AI and catalyze industries.

Strategic Pricing and Availability of Its Gaudi AI Accelerators

Intel is gearing up to launch the third generation of its Gaudi AI accelerators later this year, aiming to address a backlog of around $2 billion related to AI chips. However, the company anticipates generating only about $500 million in Gaudi 3 sales in 2024, possibly due to supply constraints.

To broaden the availability of Gaudi 3 systems, Intel is expanding its network of system providers. The company is now collaborating with Asus, Foxconn, Gigabyte, Inventec, Quanta, and Wistron alongside existing partners like Dell Technologies Inc. (DELL), Hewlett Packard Enterprise Co (HPE), Lenovo Group (LNVGY), and Super Micro Computer, Inc. (SMCI), to ensure Gaudi 3 systems are available far and wide once they hit the market.

But what caught attention at Intel's announcement was the company's attractive pricing strategy. Kits featuring eight Gaudi 2 AI chips and a universal baseboard will cost $65,000, while the version with eight Gaudi 3 AI chips will be priced at $125,000. These prices are estimated to be one-third and two-thirds of the cost of comparable competitive platforms, respectively.

While undercutting Nvidia Corporation (NVDA) on price, INTC expects its chips to deliver impressive performance. According to their estimates, a cluster of 8,192 Gaudi 3 chips can train AI models up to 40% faster than NVDA's H100 chips. Additionally, Gaudi 3 offers up to double the AI inferencing performance of the H100 when running popular large language models (LLMs).

Intel Continues to Ride with 500+ Optimized Models on Core Ultra Processors

In May, INTC announced that over 500 AI models now run optimized on new Intel® Core™ Ultra processors. These processors, known for their advanced AI capabilities, immersive graphics, and optimal battery life, mark a significant milestone in Intel's AI PC transformation efforts.

This achievement stems from Intel's investments in client AI, framework optimizations, and tools like the OpenVINO™ toolkit. The 500+ AI models cover various applications, including large language models, super-resolution, object detection, and computer vision, and are available across popular industry platforms.

The Intel Core Ultra processor is the fastest-growing AI PC processor and the most robust platform for AI PC development. It supports a wide range of AI models, frameworks, and runtimes, making it ideal for AI-enhanced software features like object removal and image super-resolution. This milestone underscores Intel's commitment to advancing AI PC technology, offering users a broad range of AI-driven functionalities for enhanced computing experiences.

Robust Financial Performance and Outlook

Buoyed by solid innovation across its client, edge, and data center portfolios, the company delivered a solid financial performance, driving double-digit revenue growth in its products. Total Intel Products chalked up $11.90 billion in revenue for the first quarter of 2024 (ended March 30), resulting in a 17% year-over-year increase over the prior year’s period. Revenue from the Client Computing Group (CCG) rose 31% year-over-year.

INTC’s net revenue increased 8.6% year-over-year to $12.72 billion, primarily driven by growth in its personal computing, data center, and AI business. Intel’s Data Center and AI (DCAI) division, which offers server chips, saw sales uptick 5% to $3.04 billion.

Also, the company reported a non-GAAP operating income of $723 million, compared to an operating loss of $294 million in the prior year’s quarter. Further, its non-GAAP net income and non-GAAP earnings per share came in at $759 million and $0.18 versus a net loss and loss per share of $169 million and $0.04, respectively, in the same quarter last year.

For the second quarter, Intel expects its revenue to come between $12.5 billion and $13.5 billion, while its non-GAAP earnings per share is expected to be $0.10.

Bottom Line

Despite vital innovations and solid financial performance, INTC’s shares have lost nearly 40% year-to-date and more than 3% over the past 12 months. However, with over 5 million AI PCs shipped since the December 2023 launch of Intel Core Ultra processors, supported by over 100 software vendors, the company expects to exceed its forecast of 40 million AI PCs by the end of 2024.

With the growing demand for AI chips, INTC could see a significant increase in Gaudi chip sales next year as customers look for cost-effective alternatives to NVDA's market-leading products. Moreover, if Intel's reasonable pricing resonates with prospective customers, the company could capture significant market share from its competitors.

Why Super Micro Computer (SMCI) Could Be a Hidden Gem for Growth Investors

Posted on by The INO.com Team

In March 2024, Super Micro Computer, Inc. (SMCI) became the latest artificial intelligence (AI) company to join the S&P 500 index, just a little more than a year after joining the S&P MidCap 400 in December 2022. Shares of SMCI jumped by more than 2,000% in the past two years, driven by robust demand for its AI computing products, which led to rapid sales growth.

Moreover, SMCI’s stock has surged nearly 205% over the past six months and more than 520% over the past year. A historic rally in the stock has pushed the company’s market cap past $48 billion.

SMCI is a leading manufacturer of IT solutions and computing products, including storage and servers tailored for enterprise and cloud data centers, purpose-built for use cases such as AI, cloud computing, big data, and 5G applications. The company has significantly benefited from the ongoing AI boom in the technology sector.

According to ResearchAndMarkets.com’s report, the global AI server market is expected to reach $50.65 billion by 2029, growing at a CAGR of 26.5% during the forecast period (2024-2029).

Specializing in servers and computer infrastructure, SMCI maintains long-term alliances with major tech companies, including Nvidia Corporation (NVDA), Intel Corporation (INTC), and Advanced Micro Devices, Inc. (AMD), which have fueled the company’s profitability and growth.

Let’s discuss Super Micro Computer’s fundamentals and growth prospects in detail:

Recent Strategic Developments

On April 9, SMCI announced its X14 server portfolio with future support for the Intel® Xeon® 6 processor with early access programs. Supermicro’s Building Block Architecture, rack plug-and-play, and liquid cooling solutions, along with the breadth of the new Intel Xeon 6 processor family, enables the delivery of optimized solutions for any workload and at any scale, offering superior performance and efficiency.

The upcoming processor family will be available with Efficient-core (E-core) SKUs rising performance-per-watt for cloud, networking, analytics, and scale-out workloads, and Performance-core (P-core) SKUs increasing performance-per-core for AI, HPC, Storage and Edge workloads. 

Also, the upcoming processor portfolio will feature built-in Intel Accelerator Engines with new support for FP16 on Intel Advanced Matrix Extensions.

In the same month, SMCI expanded its edge compute portfolio to accelerate IoT and edge AI workloads with a new generation of embedded solutions.

“We continue to expand our system product line, which now includes servers that are optimized for the edge and can handle the demanding workloads where massive amounts of data are generated,” said Charles Liang, president and CEO of SMCI.

“Our building block architecture allows us to design and deliver a wide range of AI servers that give enterprises the solutions they need, from the edge to the cloud. Our new Intel Atom-based edge systems contain up to 16GB of memory, dual 2.5 GbE LAN ports, and a NANO SIM card slot, which enables AI inferencing at the edge where most of the world's data is generated,” Liang added.

Also, on March 19, Supermicro unveiled its newest lineup aimed at accelerating the deployment of generative AI. The Supermicro SuperCluster solutions offer foundational building blocks for the present and the future large language model (LLM) infrastructure.

The full-stack SuperClusters include air- and liquid-cooled training and cloud-scale inference rack configurations with the latest NVIDIA Tensor Core GPUs, Networking, and NVIDIA AI Enterprise software.

Further, SMCI announced new AI systems for large-scale generative AI featuring NVIDIA's next-generation of data center products, such as the latest NVIDIA GB200 Grace™ Blackwell Superchip, the NVIDIA B200 Tensor Core, and B100 Tensor Core GPUs.

Supermicro is upgrading its existing NVIDIA HGX™ H100/H200 8-GPU systems for seamless integration with the NVIDIA HGX™ B100 8-GPU, thus reducing time to delivery. Also, the company strengthens its broad NVIDIA MGX™ systems range with new offerings featuring the NVIDIA GB200, including the NVIDIA GB200 NVL72, a comprehensive rack-level solution equipped with 72 NVIDIA Blackwell GPUs.

Additionally, Supermicro is introducing new systems to its portfolio, including the 4U NVIDIA HGX B200 8-GPU liquid-cooled system.

Solid Third-Quarter 2024 Results

For the third quarter that ended March 31, 2024, SMCI’s revenue increased 200.8% year-over-year to $3.85 billion. Its non-GAAP gross profit grew 163.9% from the year-ago value to $600.59 million. Its non-GAAP income from operations was $434.42 million, up 290.7% year-over-year.

The server assembler’s non-GAAP net income rose 340% from the prior year’s quarter to $411.54 million. Its non-GAAP net income per common share came in at $6.65, an increase of 308% year-over-year.

As of March 31, 2024, Super Micro Computer’s cash and cash equivalents stood at $2.12 billion, compared to $440.46 million as of June 30, 2023. The company’s total current assets were $8.06 billion versus $3.18 billion as of June 30, 2023.

Charles Liang, President and CEO of Supermicro, said, “Strong demand for AI rack scale PnP solutions, along with our team’s ability to develop innovative DLC designs, enabled us to expand our market leadership in AI infrastructure. As new solutions ramp, including fully production ready DLC, we expect to continue gaining market share.”

Raised Full-Year Revenue Outlook

SMCI expects net sales of $5.10 billion to $5.50 billion for the fourth quarter of fiscal year 2024 ending June 30, 2024. The company’s non-GAAP net income per share is anticipated to be between $7.62 and $8.42.

For the fiscal year 2024, Supermicro raised its guidance for revenues from a range of $14.30 billion to $14.70 billion to a range of $14.70 billion to $15.10 billion. Its non-GAAP net income per share is expected to be from $23.29 to $24.09.

CEO Charles Liang said he expects AI growth to remain solid for several quarters, if not years, to come. To support this rapid growth, the company had to raise capital through a secondary offering this year, Liang added.

Meanwhile, finance chief David Weigand said that the company’s supply chain continues to improve.

Bottom Line

SMCI’s fiscal 2024 third-quarter results were exceptional, with a record revenue of $3.85 billion and a non-GAAP EPS of $6.65. This year-over-year revenue growth of 200% and year-over-year non-GAAP EPS growth of 308% significantly outpaced its industry peers.

After reporting outstanding financial performance, the company raised its full-year revenue forecast as it points to solid AI demand.

Super Micro Computer, which joined the S&P 500 in March, has a unique edge among server manufacturers aiming to capitalize on the generative AI boom. Notably, the server maker’s close ties with Nvidia allow it to launch products superior to competitors, including Dell Technologies Inc. (DELL) and Hewlett Packard Enterprise Company (HPE).

The company has a history of being among the first to receive AI chips from NVDA and AMD as it assists them in checking server prototypes, giving it a head start over rivals. This has positioned SMCI as a key supplier of servers crucial for generative AI applications, leading to a remarkable 192% surge in shares so far this year.

According to an analyst at Rosenblatt Securities, Hans Mosesmann, “Super Micro has developed a model that is very, very quick to market. They usually have the widest portfolio of products when a new product comes out from Nvidia or AMD or Intel.”

Moreover, analysts at Bank of America project that SMCI’s share of the AI server market will expand to around 17% in 2026 from 10% in 2023. Argus analyst Jim Kelleher also seems bullish about SMCI. Kelleher maintained a Buy rating on SMCI’s stock.

According to the analyst, Super Micro Computer is a leading server provider for the era of generative AI. Alongside a comprehensive range of rack and blade servers for cloud, enterprise, data center, and other applications, SMCI offers GPU-based systems for deep learning, high-performance computing, and various other applications.

Given solid financials, accelerating profitability, and robust near-term growth outlook, investors could consider buying this stock for substantial gains.

Forget NVDA, Buy This AI Stock Instead

Posted on by The INO.com Team

Dell Technologies Inc. (DELL) is thriving amid the burgeoning artificial intelligence (AI) revolution, capitalizing on robust adoption. Following a stellar fiscal 2024 fourth-quarter earnings report, Dell’s stock hovers near record highs. Active participation in the AI landscape is propelling the company’s prospects, aligning with the prevailing industry momentum.

Last Friday, DELL's stock witnessed a staggering 30% surge. Investors lauded the company’s AI-driven advancements and heightened demand for its offerings, driving the year-to-date surge to 54%.

The Texas-based tech firm reported fourth-quarter adjusted earnings per share of $2.20, surpassing analysts’ expectations of $1.72. Additionally, Dell’s revenue amounted to $22.32 billion, exceeding the projected $22.17 billion. Strong data center server sales for generative AI applications offset sluggish PC sales during the period.

During the quarter that ended February 2, 2024, DELL experienced a 10.9% year-over-year decline in revenue to $22.32 billion. However, the company’s net income surged 91.1% from the prior year’s period to $1.16 billion. Despite a 5.8% year-over-year decrease, its Infrastructure Solutions Group (ISG) contributed $9.33 billion to revenue.

AI-optimized servers emerged as the primary revenue driver, generating $4.86 billion, while storage revenue saw a significant 9.9% sequential rise, contributing $4.48 billion. Servers and networking remained pivotal, underscoring DELL's strategic focus on AI-driven solutions and storage innovations.

Jeff Clarke, Vice Chairman and Chief Operating Officer of DELL, highlighted the company's robust AI-optimized server momentum, citing a nearly 40% sequential increase in orders and a doubling backlog, reaching $2.9 billion by the end of the fiscal year.

Clarke said, “We’ve just started to touch the AI opportunities ahead of us, and we believe Dell is uniquely positioned with our broad portfolio to help customers build GenAI solutions that meet performance, cost and security requirements.”

Turning to cash inflows and the balance sheet, DELL reported a fourth-quarter cash inflow from operations of $1.50 billion, primarily fueled by profitability. The company ended the quarter with $9 billion in cash and investments, and it reached its core leverage target of 1.5x, exiting the fiscal year 2024.

During the quarter, the company repurchased 11.2 million shares of stock and paid a quarterly dividend of $0.37 per share. Furthermore, DELL announced a 20% hike in its annual dividend, now standing at $1.78 per share. The dividend increase surpasses the company’s long-term financial framework and underscores its confidence in the business trajectory and capacity to generate robust cash flow.

Strategic Business Advancements

DELL has been expanding its portfolio to meet diverse customer needs across clouds, on-premises, and at the edge. Enhancements to the Dell Generative AI Solutions portfolio include support for Advanced Micro Devices, Inc.’s (AMD) Instinct™ MI300X accelerator in PowerEdge XE9680 servers and a new DELL Validated Design for Generative AI with AMD ROCm™ powered AI frameworks.

New enterprise data storage advancements have also been introduced, with planned validation with the NVIDIA Corporation’s (NVDA) DGX SuperPOD AI infrastructure, facilitating swift access to data for AI workloads using DELL PowerScale systems.

Moreover, the company has unveiled plans for the broadest portfolio of commercial AI laptops and mobile workstations, integrating built-in AI acceleration with neural processing unit (NPU) technology. Additionally, new XPS systems boast NPU integration, enhancing performance, productivity, and collaboration.

Furthermore, DELL has forged a strategic partnership with Nokia Corporation (NOK), becoming its preferred infrastructure partner for Nokia AirFrame customers. The collaboration entails transitioning to DELL PowerEdge servers with comprehensive DELL global services and support.

A Comparative Analysis of DELL and NVDA’s Performance

Following its robust fiscal 2024 fourth-quarter results reported last Thursday, DELL’s stock has surged significantly, showcasing its dominance in AI offerings. The momentum stems from DELL’s utilization of NVDA’s AI-powered GPUs for its servers, aligning with the chip giant's remarkable success.

DELL’s AI-optimized servers integrate graphics processing units (GPUs) from both NVDA and AMD. Clark noted that the heightened demand was across the H100, H800, H200, and MI300X, with the first three GPUs manufactured by NVDA and the last one by AMD.

This development is likely to please NVDA investors, given that the company also reported fourth fiscal quarter earnings surpassing Wall Street's expectations for both earnings and sales. However, its CEO, Jensen Huang, has acknowledged investor concerns regarding the sustainability of this growth and sales level throughout the year.

Furthermore, NVDA’s data center revenue suffered due to recent U.S. constraints on exporting advanced AI semiconductors to China. NVDA’s CFO, Colette Kress, highlighted that despite enhancements in the supply of AI GPUs, shortages are still anticipated, particularly for the upcoming next-generation chip, dubbed B100, slated for shipment later this year.

Additionally, NVDA’s smaller ventures didn’t exhibit the same remarkable growth. Its automotive segment experienced a 4% decline, generating $281 million in sales, while its OEM and other businesses, encompassing crypto chips, saw a mere 7% increase to $90 million.

Moreover, NVIDIA’s valuation is deemed excessively high, positioning DELL as a more favorable investment choice at present.

In terms of forward P/E, DELL is trading at 26.78x, 29.5% lower than NVDA’s 37.96x. DELL's forward EV/Sales of 1.12x is 94.1% lower compared to NVDA’s 18.91x. Additionally, DELL's forward EV/EBITDA of 9.48x contrasts with NVDA’s 29.38x.

Reflecting the heightened demand and growing interest in enterprise AI, DELL’s stock has surged nearly 37% over the past month, outpacing NVDA’s gain of 24%. Furthermore, DELL has skyrocketed more than 155% over the past nine months, while NVDA has gained approximately 119% during the same period.

DELL's Upbeat Fiscal 2025 Projections

DELL's confidence in its fiscal year 2025 outlook stems from three pivotal trends: the escalating momentum in AI, notable enhancements in traditional servers, and the imminent refresh of the aging PC installed base. Against this backdrop, DELL anticipates fiscal 2025 revenue between $91 billion and $95 billion, with a midpoint of $93 billion, reflecting 5% growth, surpassing its long-term value creation framework.

The company anticipates ISG to surge in the mid-teens, driven by AI, with a resurgence in traditional servers and storage. CSG business is forecasted to expand in the low single digits for the year. The amalgamation of ISG and CSG is expected to grow by 8% at the midpoint, counterbalanced by a decline in other sectors.

For the first quarter of fiscal 2025, DELL projects revenue between $21 billion and $22 billion, centered around $21.5 billion, marking a 3% increase. The company anticipates ISG and CSG combined to grow by 5% at the midpoint, with ISG climbing in the mid-to-high teens.

Yvonne McGill, DELL’s CFO, said, “We have strong conviction in the growth of our TAM over the long term, and we are committed to delivering against our long-term financial framework with average annual revenue growth of 3% to 4%, diluted EPS growth of at least 8% and a net income-to-adjusted free cash flow conversion of 100% or better over time.”

She has also emphasized the commitment to returning 80% or more of the adjusted free cash flow to shareholders over the long term.

Bottom Line

DELL, renowned for its PC business, has garnered considerable attention due to increased demand for its resilient servers designed for AI workloads. The fourth-quarter results showcased an enduring interest in DELL’s AI offerings, spotlighting the Dell PowerEdge XE9680 as the fastest-ramping solution in the company’s history.

After DELL’s strong earnings report, analysts have voiced optimism and confidence in the stock’s performance. Morgan Stanley analysts, led by Erik W. Woodring, upheld a Top Pick rating for DELL stock, raising the 12-month target price from $100 to $128.

Additionally, Goldman Sachs analyst Michael Ng has expressed a favorable outlook, suggesting that DELL’s stock is poised to trade higher, buoyed by the stronger-than-expected AI server backlog and improved margins in the Infrastructure Solutions Group (ISG). That bolsters the bank’s bullish stance on heightened earnings potential and sustained growth amidst robust AI demand.

Industry experts have also emphasized DELL’s position as a clear leader in the AI hardware and services market, citing the company’s ability to swiftly supply high-end server models with accelerators from various silicon providers. Dell’s competitive advantage positions it to capitalize on the early stages of the AI server opportunity, especially in the enterprise-focused market.

Expansion in AI servers will also drive growth in DELL’s storage business. With extensive training conducted using rich data sets, the company’s venture into enterprise territory presents a burgeoning storage opportunity. DELL has enhanced performance concerning latency-sensitive workloads, aligning with enterprise requirements as customers transition from training to inference.

In conclusion, DELL’s outstanding fourth-quarter performance and upbeat fiscal 2025 outlook, propelled by AI server momentum, have instilled investor confidence and received a commendation from analysts. Given NVDA’s slowing revenue growth, regulatory challenges, and alarming valuation, it could be wise to invest in fundamentally sound AI stock DELL instead.