Dell may be positioned to benefit from the recent challenges faced by Super Micro Computer (NASDAQ: ) , analysts at Evecroce ISI suggested in a note Wednesday.
As competition for AI servers intensifies, Dell Technologies Inc. (NYSE:) stands ready to take advantage of customers looking for alternative suppliers, especially in the context of ongoing supply chain diversification and service capabilities.
Evercore argues that Dell is uniquely positioned to capture market share in AI servers, especially since major customers, such as CoreWeave and various companies tied to Elon Musk’s companies, rely on two sources for their production through both Dell and SMCI.
Analysts at the company believe Dell remains a “logical partner for customers looking for better/differentiated supply chain diversity and, more importantly, strong service delivery across the deployment lifecycle,” the analysts wrote.
Evercore expects Dell’s AI server revenue to exceed $8 billion this year and surpass $10 billion in 2025. However, the focus for Dell extends beyond just revenue growth; the company also emphasizes the importance of maintaining acceptable EBITDA margins and selling differentiated solutions, including networking, storage, and services, to its customer base.
The AI server market is witnessing strong growth, reaching nearly $30 billion in 2023, driven by the adoption of accelerator-based servers that use parallel processing.
Looking ahead, Evercore expects the market to grow at a mid-to-high teens CAGR and could reach more than $56 billion by 2027. Growth is expected to be led by large tier-1 computing companies and tier-2 cloud providers in the near term, with enterprise AI adoption contributing to the expansion in the longer term.
Dell’s advantage in this competitive market is enhanced by its comprehensive service offerings, which include engineering support, management, maintenance and financial services.
Analysts also assert that “the services related to the deployment of AI servers (co-design, installation, maintenance, etc.) are the main reason Dell is winning business in both the Tier 2 and enterprise customer segments.”
Furthermore, as the customer mix shifts from tier-2 cloud providers to enterprise and corporate customers, Dell’s ability to tie services to its hardware offerings is expected to drive margin growth — a strategy seen as a key factor in Dell’s continued success in the AI server market.
Evercore maintains an “outperform” rating on Dell, with a $140 price target.
Thanks to the growing demand for artificial intelligence, the company’s shares have risen more than 43% this year, outperforming the broader market.
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