Can Dell profit from SMCI’s recent weakness? Evercore weighs By Investing.com

Dell could be positioned to capitalize on recent challenges facing Super Micro Computer (NASDAQ: ), analysts at Evecroce ISI suggested in a note on Wednesday.

With the competitive landscape for AI servers intensifying, Dell Technologies Inc (NYSE: ) stands to gain from customers looking for alternative vendors, especially in the context of supply chain diversity and ongoing service capabilities.

Evercore points out that Dell is uniquely positioned to gain market share in the AI ​​server space, particularly as key customers such as CoreWeave and various companies associated with Elon Musk’s companies source their production both at Dell and and in SMCI.

The company’s analysts believe Dell remains “a logical partner for customers seeking better/different supply chain diversity and, above all, a strong service offering throughout the implementation lifecycle,” the analysts wrote.

Evercore estimates that Dell’s AI server revenue will exceed $8 billion this year and top $10 billion in 2025. However, the focus for Dell extends beyond just revenue growth; the company also emphasizes the importance of maintaining acceptable EBIT margins and cross-selling various solutions, including networking, storage and services, to its customer base.

The AI ​​server market itself is experiencing strong growth, reaching approximately $30 billion in 2023, driven by the adoption of accelerator-based servers that use parallel processing.

Looking ahead, Evercore projects the market to grow at a compound annual growth rate (CAGR) in the mid- and high-teens, potentially reaching over $56 billion by 2027. Growth is expected to be driven by tiered hyperscalers 1 and Tier 2 cloud service providers in the short term, with enterprise AI adoption contributing to longer term expansion.

Dell’s advantage in this competitive market is further supported by its comprehensive service offerings, which include technical support, management, maintenance and financial services.

Analysts also point out that “services related to AI server deployments (co-design, installation and maintenance, etc.) are a key reason why Dell is winning business in both tier 2 and enterprise customer cohorts “.

Additionally, as the customer mix shifts from Tier 2 cloud providers to enterprise and corporate customers, Dell’s ability to attach services to its hardware offerings is expected to help drive margin growth — a strategy seen as a factor key to Dell’s continued success in the AI ​​Server Market.

Evercore maintains its “Outperform” rating on Dell with a price target of $140.

Buoyed by demand for artificial intelligence, the company’s shares have risen more than 43% this year, outperforming the broader market.