Before Dell released its financial report, Morgan Stanley warned that AI server production would be dragged down by Nvidia Blackwell

Zhitong
2024.08.29 14:01
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Morgan Stanley has lowered Dell's target price from $142 to $136 and maintained an "overweight" rating. The analysis pointed out that due to project delays, Dell's AI server construction plan for the 2024 fiscal year will be revised down, with production expected to decrease to 37,000-38,000 units for PowerEdge 9680/9680L. Despite positive signals of demand recovery, the shipment volume of AI servers for the 2025 fiscal year is also expected to decrease to 38,000 units

According to the information from Zhitong Finance APP, Dell (DELL.US) will announce its second-quarter financial results after the close of trading today. Prior to this, Morgan Stanley released a report stating that due to shipment delays and project postponements, Dell's artificial intelligence (AI) server construction plan for the fiscal years 2024 to 2025 will face downward revisions. Despite this, Morgan Stanley still maintains its "overweight" rating on Dell, but has slightly lowered the target price from $142 to $136.

A team led by analyst Eric Woodlin found in a recent market research that by 2024, Dell's PowerEdge 9680/9680L AI server production is expected to be between 37,000 and 38,000 units, down from the previous estimate of about 48,000 units. Analysts emphasized that this expected adjustment is mainly due to project delays, including Nvidia's Blackwell project, rather than a reduction or cancellation of the AI server project, competitive losses, or market share erosion.

The research results also show that there has been a recent increase in demand for Dell's AI servers based on the Hopper architecture. For the fiscal year 2025, the Morgan Stanley analyst team now expects AI server shipments to be 38,000 units, down from the previous 44,000 units, leading to a 1% decrease in their revenue and earnings per share forecasts for Dell in fiscal year 2025, to $96.5 billion and $7.84, respectively.

The analysts at the firm pointed out three reasons for the decline in the outlook for AI server construction and shipments in the second half of fiscal year 2025: weakening demand for AI servers based on Mi300x; a deeper understanding of the impact of the Blackwell project delay (which is not unique to Dell); and slight delays in some Hopper orders. They stated that based on feedback received, the delay of Nvidia's Blackwell is the single largest factor leading to the downward adjustment of Dell's AI server construction outlook in the second half of fiscal year 2025.

Furthermore, the soft demand for AMD's Mi300x AI servers may suggest that Nvidia's products are gradually eroding AMD's market share.

Overall, despite facing some short-term challenges, Dell's long-term prospects in the AI server market continue to be favored by investors. Morgan Stanley's report reflects some concerns in the short term about Dell in the market, but does not change its positive view on the company's long-term growth potential

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