4. Dell Technologies Inc.(NYSE:DELL)
Number of Hedge Fund Investors: 88
Jim Cramer highlights Dell Technologies Inc.(NYSE:DELL) as a strong investment due to its significant role in providing servers for data centers and developing AI-integrated PCs. Although there was some confusion about the recent numbers, Cramer believes Wall Street’s initial positive reaction was justified. Dell Technologies Inc.(NYSE:DELL)’s stock initially rose over 4% last Friday but later lost those gains. Despite this, Cramer sees value in owning Dell Technologies Inc.(NYSE:DELL) shares.
“This story is all about Dell making servers for the data centers that power artificial intelligence, along with new lines of AI-infused PCs. Unfortunately, the numbers were somewhat confusing, but I think that Wall Street got this one right—at least initially—as the stock timely rallied more than 4% last Friday before giving back all those gains today. Yep, Dell’s still worth owning here, and I’m going to tell you why. Let’s start with the numbers: Dell delivered a meaningful revenue beat driven by 38% growth from its Infrastructure Solutions division. Much better than expected, mostly thanks to heavy investment in AI infrastructure by corporate clients. In fact, their server and networking sales were up 80% year-over-year.
Dell’s other business, the Client Solutions Group, which includes the PC business, came in a little light, but not light enough to offset the strength in the infrastructure side. In the earnings release, Dell Vice Chairman and COO Jeff Clarke, an old hand, explained that “our AI momentum accelerated in Q2, and we’ve seen an increase in the number of enterprise customers buying AI solutions each quarter.” Notice the word “solutions”—I think that’s really important. It’s more than just a box. He added that AI-optimized server demand jumped by 23% compared to the previous quarter.
Now, last time Dell reported, some investors didn’t like the margins from Dell’s infrastructure business. Long story short, their earlier AI hardware sales mainly came from selling servers to large hyperscalers—here we’re thinking about Alphabet, Amazon, Meta—and those companies can drive a hard bargain. Dell was confident that the margins would improve later on as they sold more networking and storage equipment along with services, but hardly anyone was willing to give them the benefit of the doubt. Except me, maybe. That’s because I saw that Jeff was with Jensen—of course, Jensen Huang, CEO of Nvidia—at the GTC conference I attended.”
In fiscal year 2024, Dell Technologies Inc. (NYSE:DELL) achieved a 5% revenue increase, reaching $105 billion, showcasing its solid market position and operational efficiency. Dell Technologies Inc. (NYSE:DELL) is well-positioned to benefit from the rising demand for enterprise solutions, such as hybrid cloud environments and edge computing, which aligns with the growing trend of digital transformation.
Dell Technologies Inc. (NYSE:DELL)’s strategic acquisitions and investments, including its purchase of VMware and its focus on AI and cybersecurity, are set to boost its competitive advantage and drive future growth. These initiatives demonstrate Dell Technologies Inc. (NYSE:DELL)’s commitment to expanding its product offerings and staying ahead in the evolving technology sector. Additionally, Dell Technologies Inc. (NYSE:DELL)’s diverse range of products, from servers and storage solutions to PCs, enables it to cater to various customer needs effectively.
Carillon Scout Mid Cap Fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its first quarter 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) reported results that exceeded earnings expectations and announced a better than expected AI-optimized server order pipeline. We expect Dell to participate in the growth of artificial intelligence hardware in its server, storage and personal computing franchises. Long-term, we like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
