Dell could be positioned to benefit from the recent challenges faced by Super Micro Computer (NASDAQ:), Evecroce ISI analysts suggested in a Wednesday note.
As the competitive landscape for AI servers intensifies, Dell Technologies Inc (NYSE:) can benefit from customers seeking alternative suppliers, especially in the context of continued supply chain diversity and service capabilities.
Evercore emphasizes that Dell is uniquely positioned to gain market share in the AI server space, especially as key customers, such as CoreWeave and several companies associated with Elon Musk’s companies, dual-source their production from both Dell and SMCI.
The company’s analysts believe Dell “remains a logical partner for customers seeking better/different supply chain diversity and, crucially, strong service offerings throughout the deployment lifecycle,” analysts wrote.
Evercore predicts that Dell’s AI server revenue will exceed $8 billion this year and exceed $10 billion by 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 robust growth, which will reach approximately $30 billion by 2023, driven by the adoption of accelerator-based servers that use parallel processing.
Looking ahead, Evercore expects the market to grow at a compound annual growth rate (CAGR) in the mid-to-high teens, potentially reaching more than $56 billion by 2027. Growth is expected to be led by tier 1 hyperscalers and tier 2 cloud services. suppliers in the short term, with AI adoption among companies contributing to longer-term expansion.
Dell’s lead in this competitive market is further strengthened by its extensive service offering, including technical support, management, maintenance and financial services.
Analysts also highlight that “services related to AI server implementations (co-design, installation and maintenance, etc.) are a key reason why Dell is bringing in revenue in both tier-2 and enterprise customer cohorts.”
Additionally, as the customer mix shifts from tier-2 cloud service providers to enterprise and business customers, Dell’s ability to tie services to its hardware offerings is expected to contribute to margin growth – a strategy seen as a key factor in the continued success of Dell on the market. AI server market.
Evercore maintains its Outperform rating for Dell, with a target price of $140.
Driven by demand for AI, the company’s shares rose more than 43% this year, outperforming the broader market.
