Dell Up 9% on $10B AI Server Deal, Eyes Nvidia Chips

Dell's stock jumps 9% amid optimism for $10 billion AI server sales by 2025, leveraging Nvidia's tech and boosting PC market.

By Alex P. Chase

5/15, 15:33 EDT
Dell Technologies Inc.
NVIDIA Corporation

Key Takeaway

  • Dell's stock surged 9% after Morgan Stanley upgraded its price target to $152, citing potential $10 billion AI server revenue by 2025.
  • The optimism is fueled by Dell's use of Nvidia's advanced AI chips and anticipated demand for AI-equipped PCs.
  • Goldman Sachs projects a 160% increase in data center power demand by 2030 due to AI, highlighting the need for significant infrastructure investments.

Dell's AI Server Sales Surge

Dell Technologies Inc. experienced a significant stock price increase of over 9% on Wednesday, reaching an all-time high. This surge was primarily driven by Morgan Stanley's optimistic assessment of Dell's potential to capitalize on the growing demand for artificial intelligence (AI) servers. Analyst Erik Woodring of Morgan Stanley upgraded Dell's price target from $128 to $152 per share, highlighting the company's accelerating momentum in securing AI server contracts. Woodring's analysis suggests that Dell could generate approximately $10 billion in AI server revenue by fiscal 2025. This growth is attributed to Dell's use of Nvidia's advanced AI chips, including the H100 GPU and Blackwell-generation chips, in their servers. Nvidia CEO Jensen Huang's endorsement of Dell at Nvidia’s annual conference further solidified the company's position in the AI server market.

PC Market and AI Integration

Aside from its AI server business, Dell is also poised to benefit from developments in the PC market. With Microsoft set to unveil new AI features at its upcoming conference, there is anticipation of increased demand for PCs equipped with these capabilities. Despite a slump in PC sales over the past two years, Morgan Stanley's Erik Woodring remains optimistic about the sector's recovery. He notes a growing demand for upgrades and refreshes, as well as positive adjustments to notebook original design manufacturer (ODM) builds. This optimism is supported by the broader industry trend of integrating AI technologies, which is expected to stimulate demand for new hardware.

AI's Impact on Data Center Power Demand

The push towards AI is not without its challenges, particularly in terms of power consumption and environmental impact. Goldman Sachs Research projects a 160% increase in data center power demand by 2030, attributing this surge to the intensive electricity requirements of AI operations. This growth in power demand highlights the need for substantial investments in infrastructure and renewable energy sources. In the United States alone, an estimated $50 billion will be required to support the additional power needs of data centers. Europe faces a similar challenge, with nearly €1.7 trillion needed for grid upgrades and renewable energy expansion. These investments are crucial for managing the environmental and social costs associated with increased carbon emissions from data centers.

Street Views

  • Erik Woodring, Morgan Stanley (Bullish on Dell):

    "Dell is seeing accelerating momentum, especially in winning business to build AI servers, unlocking a new bull case for the stock... All-in, we are hearing about more AI server momentum at Dell than at any other OEM."