Dell Technologies (DELL) founder and CEO Michael Dell thinks talk of an AI spending letdown is way overblown.
“There always are bumps in the road as you launch a rocket and create new capabilities. You have new product cycles. You have new introductions of things. And some customers want the existing one faster. Some want to wait for the new one. We have all the above,” Dell told Yahoo Finance at the Citi TMT conference in New York City on Wednesday.
“But the macro picture here is very, very clear, and that is that there’s enormous demand. It’s growing. It’s expanding out from the hyperscalers to the service providers to enterprise to commercial to sovereign AI to embedded AI to the edge to retail to manufacturing to your PC to here, there, and everywhere,” he added.
Dell’s second quarter underscored why the tech titan’s stock has gained an impressive 45% year to date, in part as it’s seen as a key player in the build-out of America’s AI infrastructure.
The company said it secured $3.1 billion of AI server sales in the quarter, almost double the $1.7 billion netted in the preceding quarter.
Sales in the company’s Infrastructure Solutions Group (ISG) surged 38% to $11.65 billion. AI sales are captured in the ISG segment.
Dell’s Client Solutions Group — which includes sales of PCs and laptops — saw sales drop 4% to $12.41 billion. Consumer sales declined 22% to $1.86 billion, while the commercial business was flat at $10.6 billion.
“What organizations are seeing is this is a historic opportunity to make their businesses way more productive and efficient, while at the same time, kind of reimagining them given all this capability,” Dell, who first started the company in 1984, said.
By and large, the Street remains bullish on Dell’s stock due to its AI exposure and because it looks too cheap to ignore.
“Combining the revenue opportunity [for AI] over the medium-term — which increases visibility into double-digit revenue growth for the core business, and the continued focus on operating expenses, we see a robust earnings growth trajectory [for Dell] which is not fully appreciated in the 13x P/E multiple the shares are trading at currently,” said JPMorgan analyst Samik Chatterjee in a client note.
Chatterjee reiterated an Overweight rating on Dell shares, the equivalent of a Buy.
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