Dell is well-positioned to take advantage of the recent challenges faced by Super Micro Computer (NASDAQ:), according to analysts at Evercore ISI. The competitive landscape for AI servers is becoming more intense, and Dell Technologies Inc (NYSE:) is poised to benefit from customers looking for alternative suppliers, especially in light of the ongoing need for supply chain diversity and strong service capabilities.
Evercore points out that Dell has a unique opportunity to increase its market share in the AI server space, particularly as key customers like CoreWeave and various companies associated with Elon Musk’s ventures are diversifying their production between Dell and SMCI. The analysts believe that Dell is a logical choice for customers seeking better diversity in their supply chain and a robust services offering throughout the deployment process.
Evercore forecasts that Dell’s AI server revenues will surpass $8 billion this year and exceed $10 billion by 2025. Dell’s focus goes beyond revenue growth to include maintaining acceptable EBIT margins and cross-selling networking, storage, and service solutions to its customer base.
The AI server market is experiencing significant growth, expected to reach around $30 billion by 2023, driven by the adoption of accelerator-based servers utilizing parallel processing. Looking ahead, Evercore projects the market to grow at a compound annual growth rate (CAGR) in the mid-to-high teens, potentially reaching over $56 billion by 2027.
Dell’s advantage in this competitive market is further enhanced by its comprehensive service offerings, including engineering support, management, maintenance, and financial services. Analysts highlight that Dell’s ability to provide services related to AI server deployments is a key factor in its success with tier-2 and enterprise customers.
As the customer mix shifts towards enterprises and corporate clients, Dell’s ability to attach services to its hardware offerings is expected to drive margin growth, a strategy crucial for Dell’s continued success in the AI server market.
Evercore maintains an “Outperform” rating on Dell with a target price of $140. The company’s shares have surged more than 43% this year, driven by increasing demand for AI solutions, outperforming the broader market.