Talk of a slowdown is overblown

Dell Technologies ( DELL ) founder and CEO Michael Dell thinks talk of a decline in AI spending is overblown.

“There are always bumps in the road when you launch a missile and create new capabilities. You have new product cycles. You have new stuff introductions. And some customers want the existing one faster. Some want to wait for the new one. We have all of 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, which is that there is enormous demand. It is growing. It extends from hyperscalers to service providers, to enterprise, to commercial, to sovereign AI, to embedded AI at the edge, to retail to manufacturing. to your computer 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 because it’s seen as a key player in building America’s AI infrastructure.

The company said it secured $3.1 billion in AI server sales in the quarter, nearly double the $1.7 billion achieved in the previous quarter.

Sales of the company’s infrastructure solutions group (ISG) rose 38% to $11.65 billion. AI sales are captured in the ISG segment.

Dell’s customer solutions group — which includes PC and laptop sales — saw sales fall 4 percent to $12.41 billion. Consumer sales fell 22% to $1.86 billion, while commercial business was flat at $10.6 billion.

“What organizations are seeing is that this is a historic opportunity to make their businesses much more productive and efficient while at the same time reimagining them with all this capability in mind,” said Dell, who started the company in 1984.

Overall, the Street remains bullish on Dell stock because of its exposure to AI and because it looks too cheap to ignore.

“Combining the medium-term revenue opportunity (for AI) – which increases visibility into double-digit revenue growth for the core business and continued focus on operating expenses, we see a robust earnings growth trajectory (for Dell) that is no is fully valued at the 13x P/E multiple at which the stock currently trades,” JPMorgan analyst Samik Chatterjee said in a client note.

Chatterjee reiterated an Overweight rating on Dell shares, the equivalent of a Buy.

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Brian Sozzi is the executive editor of Yahoo Finance. Follow Sozzi on X @BrianSozzi and further LinkedIn. Advice on deals, mergers, activist situations or anything else? Email [email protected].

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