‘Big News’: Investor Explains the Recent Gains for Dell Stock

There was some big news impacting Dell Technologies (NYSE:DELL) last week, which caused its share price to burst out of the gate to start Friday’s trading session. Every action has an equal and opposite reaction, and some of this dynamic was certainly at play.

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To be specific, one of Dell’s rivals, Super Micro Computer, found itself in a world of trouble. News broke that one of SMCI’s founders had been arrested for smuggling contraband Nvidia servers to China, and the maker of AI server and storage solutions fell hard.

All told, SMCI lost about a third of its value. While Dell’s rise didn’t exactly mirror SMCI’s losses, it certainly pushed DELL up in the early going. Though the overall market’s fall pressured DELL as the day progressed, its share price was in the black for the day due to the developments at SMCI.

At least that’s the explanation investor Johnny Rice is going with to describe what happened.

“Dell’s fastest-growing business segment competes directly with Super Micro – both build AI servers filled with Nvidia chips – and the allegations will likely prompt Super Micro customers to look elsewhere,” states the investor.

Rice points out that Dell’s AI server revenues have been soaring. They reached $9 billion last quarter, an increase of 342% year-over-year. The company also has a record backlog of $43 billion, which Dell management has stated constitutes “powerful proof that our engineering leadership and differentiated AI solutions are winning.”

This new development could be another boon for Dell, and the investor believes Dell could very well “benefit competitively.” In other words, some of SMCI’s losses could become Dell’s gains.

So, does this mean that now is the time for investors to go all-in on Dell? Actually, on that note, Rice offers some words of caution.

It’s the macroeconomic picture that’s weighing down the investor’s otherwise bullish inclinations. In fact, he’s worried that a rerating could be on the horizon if things go sideways.

“I don’t think this is the time to be making new investments in AI-related stocks,” concludes Rice. “Valuations are stretched, and a recession could be very painful for the sector.” (To watch Johnny Rice’s track record, click here)

Wall Street, however, likes what it sees when it comes to Dell. With 11 Buys, 1 Hold, and 1 Sell, DELL enjoys a Strong Buy consensus rating. Its 12-month average price target of $168.92 points to gains of ~7% in the year ahead. (See DELL stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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