Shares of Dell Technologies (NYSE: DELL) saw a significant uptick this week, riding the wave of optimism fueled by reports of winning key contracts linked to Tesla’s AI server expansion.
The Tesla Factor
Dell’s notable surge was attributed to its victory in Tesla’s AI server evolution. Industry pundits suggest that Dell’s success in securing orders from Tesla is poised to bolster its $2.9 billion AI backlog, with projections indicating a potential revenue boost of $2.5 billion to $3 billion this year.
Although this incremental revenue may not be a game-changer for Dell, which generated $88.4 billion in revenue last year, it underscores the growing importance of AI in shaping future demand.
While Super Micro Computer has taken an early lead in the AI server market, Dell’s size and reach position it favorably to capitalize on the burgeoning AI trend.
Image source: Getty Images.
Looking Ahead for Dell
While Dell has not officially confirmed details of its deal with Tesla, more clarity is anticipated with the upcoming earnings report on May 30.
Analysts foresee a 6.8% rise in revenue to $21.66 billion, alongside a decrease in earnings per share from $1.31 to $1.22, reflecting challenges in the PC market.
Investor focus remains fixed on Dell’s AI-related prospects, including those stemming from Tesla, as any positive developments in this realm are likely to sway the stock price despite the overall financial results.
Investment Considerations
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Suzanne Frey, an executive at Alphabet, sits on The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Tesla.