Dell shares gain after strong AI server demand boosts annual forecast

Sept 2 : Dell Technologies' shares climbed nearly 10 per cent in premarket trading on Wednesday, as strong demand for its AI-optimized servers powered an increase in its annual revenue and profit forecasts.

AI infrastructure companies have benefited from rising demand as tech firms and hyperscalers ramp up investments in data centers to support large language models and other AI applications. Peer Super Micro Computer had also reported upbeat results last month.

"The AI momentum spoke for itself," said analysts at J.P.Morgan, noting Dell's record $60 billion of orders and $95 billion backlog in the quarter.

Dell's servers, equipped with Nvidia's chips, are sought by clients, including AI cloud providers Nscale and CoreWeave, to build computing clusters for training and running AI models.

"Storage strength is really playing a role and it seems sustainable as AI is driving fundamental growth in Dell's most profitable business," said analysts at Melius Research.

The brokerage raised its price target on the stock to $735, the highest among the analysts tracked by LSEG.

Dell raised its annual revenue forecast to $192 billion from $167 billion, and adjusted earnings per share target to $25.50 from $17.90 earlier.

Its second-quarter revenue jumped 58 per cent to a record $47 billion, surpassing Wall Street estimate of $44.92 billion.

Shares of other AI server makers, including Super Micro and Hewlett Packard Enterprise, were up 0.7 per cent and 5.4 per cent, respectively, following Dell's results.

Dell is set to add about $26 billion in market value at the current share price of $465, if gains hold.

Its shares were trading at 18.12 times expected earnings over the next 12 months, according to LSEG data. That compares with 12.56 and 8.06 for HPE and Super Micro, respectively.