Core Viewpoint - The article discusses investment opportunities in the AI hardware sector, focusing on two companies: Super Micro Computer and Dell, highlighting their contrasting growth rates and market positions [1][2]. Company Analysis - Nvidia is identified as the leading stock in AI hardware, but other companies like Super Micro Computer and Dell also play significant roles in the AI value chain [1][2]. - Dell's infrastructure solutions group generated $11.4 billion in Q3 FY 2025, showing a year-over-year growth of 34%, while its client solutions group reported $12.1 billion with a decline of 1% [6]. - Supermicro's servers are noted for their advanced liquid-cooled technology, which offers up to 40% energy savings, making them a premium option compared to Dell [4]. Growth and Performance - Dell's overall performance is affected by the contrasting results of its two segments, with the infrastructure solutions group driving growth amid a challenging client solutions group [5][6]. - Supermicro is projected to achieve revenue between $5.9 billion and $6 billion for Q1 FY 2025, indicating a growth of 181% at the midpoint, although this falls short of previous expectations [10]. - Supermicro's Q2 revenue is anticipated to be between $5.5 billion and $6.1 billion, suggesting a potential decline quarter over quarter, which raises concerns given the industry's expected growth in AI spending [11]. Valuation and Investment Considerations - Both companies have similar price-to-forward-earnings valuations, making it difficult to determine a clear investment advantage based solely on valuation [12]. - Despite Supermicro's faster growth, trust in management remains a critical factor for investors, especially given recent accounting scrutiny [8][13]. - The article concludes that, due to the challenges faced by both companies, investors may be better off focusing on established players like Nvidia in the AI hardware market [13][14].

Core Viewpoint - Dell Technologies (DELL) is projected to increase by 55% in 2024, despite a 7% decline in December, indicating potential for recovery by year-end [1] Group 1: Stock Performance and Trends - DELL's 260-day moving average has historically served as a bullish trendline, with the stock encountering this line twice in the last three years [1] - The stock has traded above the moving average 80% of the time over the past two months, closing above it in eight of the last ten sessions, leading to an average gain of 13.9% one month later [2] - Currently priced at $118.66, a similar gain would help recover the 14.3% gap experienced in the last 30 days [2] Group 2: Technical Indicators - The 14-day relative strength index (RSI) for DELL is at 25, nearing "oversold" territory, suggesting potential for a rebound [3] - Options traders exhibit bearish sentiment, with the 50-day put/call volume ratio ranking in the 96th percentile of its annual range [3] - The stock's put/call open interest ratio is in the elevated 70th percentile, indicating a potential unwinding of bearish positions that could support further gains [4] Group 3: Volatility and Performance Expectations - DELL's Schaeffer's Volatility Scorecard (SVS) stands at 85 out of 100, indicating a tendency to outperform volatility expectations, which could benefit options traders [4]

Financial Performance - Dell Technologies reported strong demand for servers and networking offerings, leading to overall net revenue growth in the third quarter of Fiscal 2025 [253]. - The Infrastructure Solutions Group (ISG) benefited from increased demand for AI-optimized solutions, with elevated backlog levels for such offerings [254]. - The company anticipates modest net revenue growth for the Client Solutions Group (CSG) in the fourth quarter of Fiscal 2025, influenced by the timing of the anticipated PC refresh cycle [257]. - For the three months ended November 1, 2024, total net revenue was $24,366 million, representing a 10% increase compared to $22,251 million for the same period last year [294]. - ISG net revenue growth was a key driver for the overall 10% increase in net revenue during the third quarter, primarily due to growth in servers and networking offerings [297]. - Product net revenue increased by 13% in Q3 Fiscal 2025, driven by growth in ISG product revenue, partially offset by a decline in CSG product revenue [303]. - Services net revenue increased by 1% in Q3 and 2% in the first nine months of Fiscal 2025, primarily due to growth in CSG third-party software support and maintenance [306]. - During the first nine months of Fiscal 2025, net income surged 43% to $2.9 billion, and non-GAAP net income increased 5% to $3.8 billion, primarily driven by a reduction in income tax expense [337]. Cost Management and Expenses - Input costs are expected to increase in the fourth quarter of Fiscal 2025, primarily due to anticipated inflation for component costs [258]. - The company remains focused on disciplined cost management and anticipates a continued reduction in overall headcount [260]. - Operating expenses for the three months ended November 1, 2024, were $3,639 million, a 1% decrease from $3,662 million in the previous year [286]. - Total operating expenses decreased by 1% in Q3 and 3% in the first nine months of Fiscal 2025, mainly due to a decline in selling, general, and administrative expenses [320]. - Research and development expenses increased by 8% in Q3 and 10% in the first nine months of Fiscal 2025, reflecting higher employee compensation [322]. Profitability and Margins - Non-GAAP operating income for the three months ended November 1, 2024, was $2,199 million, representing a 12% increase from $1,964 million in the same period last year [288]. - Net income for the three months ended November 1, 2024, was $1,127 million, a 12% increase compared to $1,004 million in the prior year [288]. - Non-GAAP net income for the three months ended November 1, 2024, was $1,540 million, an 11% increase from $1,389 million in the previous year [288]. - Gross margin for products was 15.0%, down from 16.6% in the previous year, while services gross margin was 42.1%, up from 40.9% [294]. - Earnings per share attributable to Dell Technologies Inc. for the three months ended November 1, 2024, was $1.58, a 16% increase from $1.36 in the previous year [288]. - Operating income for the third quarter increased by 12% to $1.7 billion, while non-GAAP operating income also rose by 12% to $2.2 billion [298]. Cash Flow and Financing - Free cash flow decreased by 37% to $914 million for the three months ended November 1, 2024, compared to $1,448 million for the same period last year [292]. - Adjusted free cash flow was $716 million, reflecting a 17% decrease compared to $860 million in the prior year [292]. - Cash provided by operating activities was $3.9 billion for the first nine months of Fiscal 2025, down from $7.1 billion in the same period last year [300]. - The company spent $1.9 billion on capital expenditures during the first nine months of Fiscal 2025, compared to $2.0 billion in the same period of Fiscal 2024 [383]. - The company repurchased approximately 16 million shares of Class C Common Stock for a total purchase price of approximately $1.8 billion during the first nine months of Fiscal 2025 [385]. Strategic Investments and Market Position - Dell Technologies plans to continue evaluating strategic investments and acquisitions to advance its innovation agenda [269]. - The company is well-positioned for long-term profitable growth, responding to demand for IT solutions driven by a data and AI-enabled world [301]. - Approximately 50% of net revenue is generated from sales to customers outside the United States, making the company susceptible to foreign currency exchange rate fluctuations [270]. - The acquisition of VMware by Broadcom has led to changes in the commercial relationship, with Dell no longer acting as a distributor of VMware's standalone products [262]. Tax and Regulatory Considerations - The effective income tax rate for the third quarter of Fiscal 2025 was 19.0%, up from 14.9% in the same period last year, influenced by discrete tax items [332]. - The company expects future increases in effective income tax rate and cash income tax payments due to the global minimum tax, but does not anticipate a material impact on Fiscal 2025 results [334]. - The aggregate adjustment for income taxes during the first nine months of Fiscal 2025 included discrete tax benefits of $0.4 billion related to uncertain tax benefits [284]. Risk Management - The company actively monitors economic conditions and manages credit risk associated with financial counterparties [391][392]. - The company uses derivative instruments to hedge against foreign currency exchange rate risks and interest rate risks related to its variable-rate debt portfolio [393][394]. - The company has a diversified supplier base and employs flexible purchase arrangements to minimize inventory risk [388]. - The company’s financial exposure to borrowers and counterparties is routinely evaluated to manage concentration risk [391].

Core Viewpoint - Dell Technologies is experiencing a stock sell-off due to short-term concerns following its fiscal third quarter earnings, presenting a potential opportunity for long-term investors as the company is expected to see growth in both its PC and AI server businesses by 2025 [1] Financial Performance - In the third quarter, Dell reported a revenue increase of 10% to $24.4 billion and adjusted earnings per share (EPS) growth of 14% to $2.15, although revenue fell short of analyst estimates [2] - The company's guidance for the fourth quarter forecasts revenue between $24 billion and $25 billion and adjusted EPS between $2.40 and $2.60, which is below analyst expectations of $25.59 billion and $2.65 [3] Market Conditions - The decline in Dell's stock was influenced by disappointing guidance, particularly in the PC and AI server segments, with the PC market facing a downturn since 2022 and investors growing impatient for a turnaround [4] - Demand for AI servers is currently affected by delays in Nvidia's new Blackwell chip, leading some customers to postpone purchases [5] Long-term Outlook - Despite short-term softness, Dell's AI server backlog increased to $4.5 billion, up 18.4% from the previous quarter, and the company's immediate addressable market pipeline grew by 50% sequentially [7] - The anticipated demand for PCs is expected to rise as the Windows 10 operating system phases out in October 2025, prompting enterprises to upgrade their systems [11] Valuation - Dell's stock is currently trading at a relatively low valuation of 22 times trailing earnings, making it an attractive option for investors despite potential short-term disappointments [12]

Summary of Dell Technologies Inc. Conference Call Company Overview - **Company**: Dell Technologies Inc. (NYSE: DELL) - **Event**: UBS Global Technology and AI Conference - **Date**: December 3, 2024 - **Key Participant**: Arthur Lewis, President of ISG Core Industry Insights - **Industry Focus**: Information Technology, specifically in AI optimized servers, storage, and networking solutions Key Points and Arguments AI Optimized Servers - **Revenue Growth**: Dell reported $3.6 billion in revenue growth from orders, an 11% sequential increase, with shipments totaling $2.9 billion [8] - **Backlog**: The company has a backlog of approximately $4.5 billion, indicating strong demand in the marketplace [8] - **Pipeline Growth**: The next five-quarter pipeline grew 50% sequentially, with a 55% increase in enterprise opportunities, now having 2,000 unique buyers [9] Product Portfolio and Innovation - **Diverse Offerings**: Dell's product portfolio includes servers, networking, and storage solutions, with a focus on energy efficiency and high-density designs [11] - **Liquid Cooling Technology**: The company has been a leader in liquid cooling solutions, which are becoming increasingly important for Tier 2 CSPs and sovereign customers [26] - **AI Factory Solutions**: Dell has developed over 40 AI solutions that cater to various use cases, enhancing its competitive edge [12] Competitive Landscape - **Market Positioning**: Dell emphasizes its strong value proposition over competitors, focusing on innovation and customer customization rather than worrying about competition from ODMs [25] - **Customer Demand**: The company believes that enterprises require more robust solutions compared to hyperscalers, which often prefer ODM solutions [24] Financial Performance - **Operating Income**: The ISG business is growing at 34%, with an operating income of $1.5 billion, growing faster than revenue at 41% [19] - **AI Server Margins**: AI server margins have shown consistent growth, with an uptick from Q1 to Q3, indicating a healthy margin environment [34] Storage Market Insights - **Market Recovery**: Dell anticipates a recovery in the storage market, which typically lags behind server growth, with a forecasted growth of 4% next year [47] - **Product Launches**: The company has launched new products like PowerStore Prime, which has seen double-digit growth, indicating strong demand in the storage segment [48] Networking Business - **Importance of Networking**: The networking segment is crucial for AI workloads, with Dell planning to grow this business significantly in the coming quarters [51] Future Outlook - **Focus on Storage**: Dell aims to regain market share in storage, which is expected to contribute positively to margins in the upcoming fiscal year [55][60] - **Innovation Pace**: The rapid pace of innovation within Dell's portfolio is highlighted as a key strength, with new products being developed continuously [52] Additional Important Insights - **Customer Customization**: Dell's approach to understanding customer needs and providing tailored solutions is a significant part of its strategy [17] - **Vertical Integration**: The company is working towards vertical integration in its cooling solutions, which is expected to enhance competitive advantage [30] This summary encapsulates the key insights and strategic directions discussed during the conference call, highlighting Dell Technologies' focus on AI, innovation, and market positioning within the IT industry.

Core Viewpoint - Dell Technologies (DELL) shares have declined 9.9% following the release of its third-quarter fiscal 2024 results, despite year-over-year increases in earnings and revenues, primarily due to weak guidance stemming from ongoing demand challenges in the consumer PC market and a tough macroeconomic environment [1] Group 1: Financial Performance - DELL shares have returned 84.1% over the trailing 12 months, outperforming the Zacks Computer – Micro Computers industry's growth of 26.2% and the broader Zacks Computer & Technology sector's return of 35.7% [2] - The Zacks Consensus Estimate for DELL's fiscal 2025 earnings is $7.82 per share, reflecting a 9.68% year-over-year growth, while the estimate for fiscal 2026 is $9.61 per share, indicating a growth of 22.82% [10] Group 2: AI and Server Demand - Strong demand for AI servers, driven by digital transformation and interest in generative AI applications, has been a significant growth catalyst for DELL [2] - DELL's AI server pipeline grew 50% sequentially in the fiscal third quarter, with orders reaching $3.6 billion, primarily from Tier-2 cloud service providers [4][5] - The company shipped $2.9 billion worth of AI servers in the fiscal third quarter, with an AI server backlog of $4.5 billion at the end of the quarter [5] Group 3: Market Outlook - DELL anticipates strong top-line growth for the second half of fiscal 2025, driven by robust AI demand and an upcoming PC refresh cycle with new AI-powered PCs expected to boost revenues in fiscal 2026 [6][8] - The AI hardware and services market is projected to reach $174 billion by 2027, with a CAGR of over 22% from 2023 to 2027 [8] Group 4: Valuation and Trading Indicators - DELL shares are considered undervalued, with a Value Score of A and a forward 12-month P/E ratio of 13.69X, significantly lower than the sector's average of 26.53X [12] - DELL shares are trading above both the 50-day and 200-day moving averages, indicating a bullish trend [14]

Core Insights - The article discusses the investment analysis approach of Michael Del Monte, highlighting his macro-value-oriented strategy and cross-industry analysis expertise [1]. Group 1: Analyst Background - Michael Del Monte has over 5 years of experience as a buy-side equity analyst and over a decade in professional services across various industries including Oil & Gas, Oilfield Services, Midstream, Industrials, Information Technology, EPC Services, and Consumer Discretionary [1]. Group 2: Investment Strategy - The investment analysis approach taken by Michael emphasizes macroeconomic factors and value-oriented metrics, allowing for informed investment recommendations based on comprehensive industry comparisons [1].

Core Viewpoint - Partnerships with Nvidia for AI server development are attracting investor interest in Dell Technologies and Hewlett Packard Enterprise, despite soft demand for traditional PCs [1][2]. Dell Technologies - Dell's Q3 sales increased by 10% year over year to $24.36 billion, although it fell short of Zacks estimates of $24.56 billion [3]. - The Infrastructure Solutions Group (ISG) segment achieved record sales of $11.4 billion, a 34% increase from the previous year, driven by server and networking revenue of $7.4 billion, which surged by 58% [3]. - Q3 earnings per share (EPS) rose 14% to $2.15, exceeding expectations of $2.06, marking 11 consecutive quarters of surpassing Zacks EPS Consensus with an average earnings surprise of 10.44% [4]. - Dell's Q4 sales guidance of $24-$25 billion is below analyst expectations, attributed to weaker demand for traditional PCs and increased competition, with the current Zacks Consensus at $25.27 billion, indicating a 13% growth [5]. Hewlett Packard Enterprise - HPE is expected to report a 12% increase in Q4 sales to $8.23 billion, up from $7.35 billion in the prior year, with earnings anticipated to rise 6% to $0.55 per share [6]. - HPE's server revenue surged by 35% in its fiscal third quarter to $4.3 billion, contributing to an overall Q3 sales increase of 10% year over year to $7.71 billion, slightly exceeding estimates of $7.66 billion [7]. - HPE has consistently met or exceeded earnings expectations for nine consecutive quarters, with an average EPS surprise of 7.48% in its last four quarterly reports [7]. Stock Performance - Dell's stock has increased by over 60% this year, while HPE shares have risen by 25%, both outperforming broader indexes [9]. - Dell trades at a forward earnings multiple of 15.8X, while HPE trades at 9.9X, compared to Nvidia's 46.2X, suggesting attractive valuations for both companies [11]. - Both companies trade at significant discounts to the S&P 500's forward earnings multiple of 25.3X and below the optimal level of less than 2X sales [13]. Final Thoughts - Despite challenges from weaker PC demand, Dell and HPE are positioned as viable investments for exposure to AI growth, currently holding a Zacks Rank 3 (Hold) [14].

Group 1 - The account is managed by Noah's Arc Capital Management, focusing on providing Wall Street level insights to main street investors [1] - The research primarily targets 20th century stocks undergoing transformation in the 21st century, while also covering companies that facilitate these transformations [1] - The emphasis is on identifying innovations in business models that could lead to significant stock changes [1] Group 2 - The managing partner of Noah's Arc Capital Management is Noah Cox, whose views may not necessarily reflect those of the firm [3] - The article is intended solely for informational purposes and does not constitute investment advice [3]

As we head into the final parts of 2024, we can see that there are several important themes that have defined the financial markets during this period of time. Perhaps most important has been the ramp-up inAnalyst’s Disclosure: I/we have a beneficial long position in the shares of DELL, NVDA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business re ...