What AI Comments From Dell and HP Mean for These 3 Holdings
The risk-to-reward tradeoff for one position is compelling near this price level.
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Let’s kick off one of the most heavy travel days of the year by catching up on comments from Dell DELL and HP HPQ last night about AI PCs and AI server demand. Cutting to the chase, their take on AI PCs matches other forecasts we’ve seen of late that call for a mix shift in the PC upgrade cycle to increasingly favor AI PCs over the next two to three years. That is in line with Qualcomm’s QCOM multi-year diversification plan we discussed last week.
Shifting to Dell’s comments about AI servers and related networking equipment, demand remains robust there as well, which supports our bullish views on Nvidia NVDA and Marvell Technology MRVL. This brings another layer of support for Marvell’s quarterly earnings report next week.
As far as NVDA shares, they’ve fallen back over the last few trading sessions and are coming up on the 50-day moving average just below $135. If they move below that support level, the next one to watch clocks in around $126. If we see NVDA move to that level, it brings a very nice risk-to-reward tradeoff in the shares.
Now let’s review last night’s earnings call comments from Dell and HP:
Dell
“ISG revenue was $11.4 billion up 34%. Servers and networking revenue was $7.4 billion up 58%. This was a Q3 record for us. And we continue to see strong demand across both Traditional and AI servers.”
“We shipped $2.9 billion of AI servers in Q3, resulting in AI server backlog of $4.5 billion. Our five-quarter pipeline grew more than 50% sequentially with growth across all customer types.”
“We expect multiple tailwinds going into next year, including more robust AI demand supported by our strong five-quarter pipeline. There's also an aging install base in both PCs and Traditional servers that are primed for a refresh.”
In terms of its guidance for the current quarter, Dell shares it sees it being impacted by the shift to Blackwell, which, per Dell, represents “a significant portion of the demand and now is a significant portion of the backlog” as the “order shift in Q3 shifted dramatically towards Blackwell.”
“More Enterprise customers are beginning to refresh, albeit modest and in a more price competitive environment. We are seeing an indication that customers are lining up their upgrade cycles with new AI PCs in the first half of next year…”
“Our Consumer business was weaker-than-expected as demand and profitability remain challenged. The PC refresh cycle is pushing into next year, but has significant tailwinds around an aging install base, AI-driven hardware enhancements like battery life and Windows 10 end-of-life.”
HP
“AI PC units this quarter were more than 15% of our shipments. In fact, as recently published by Canalys, we have the number one market share of AI PC in the Windows ecosystem, and we intend to maintain this position. Looking ahead, the power of AI coupled with the strength of our portfolio will enable us to deliver new levels of efficiency and security critical to the future of work. We expect AI PC penetration to continue to further strengthen our commercial leadership. And since the Windows 11 refresh has ramped lower than previous industry transitions, we expect to see the impact of the upgrade to be more pronounced in 2025… At this point, we anticipate AI PCs will make up approximately 25% of our PC unit shipments in FY'25… three years from now, we expect them to be between 40% and 60% of the mix."
At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL and QCOM.
