June 16, 2024

Image for article titled Dell stock plummets 20% because its AI play is falling short

Photo: Abdullah Guclu/Anadolu (Getty Images)

Dell’s stock price fell more than 20% on Friday as investors worried about its not-yet-very-profitable AI servers. But analysts at major investing firms maintained confidence in the company’s AI strategy.

Dell’s chief operating officer acknowledged in the company’s first quarter earnings call that its margins could be better. And Sanford Bernstein analyst Toni Sacconaghi expressed concerns that its AI servers “are being sold at near-zero margins” in a research note reported by Bloomberg. Analysts also had expected the company to report a larger backlog for its powerful servers equipped with Nvidia chips suited for running AI software. While Bank of America analyst Wamsi Mohan expected Dell’s backlog of AI server orders to reach $4 billion to $5 billion in the first quarter, for example, it fell short — but still grew 30% to $3.8 billion.

Many analysts expressed confidence that Dell’s AI-related profits will grow in the long-run.

“[W]e are still in the early stages of AI adoption with continued strong pipeline and momentum around AI servers, where we think Dell will be able to capture higher AI margins over time,” Mohan wrote.

Analysts at Goldman Sachs, Wells Fargo, Morgan Stanley, Raymond James, and TD Cowen raised their price targets for the stock to between $155 and $175 on Friday morning before the market opened.

Dell stock was down 21% in midday trading before recovering to close down about 18%, to about $139 per share. But the stock is up 86% so far this year.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *