AI Hardware Trade Splits Amid Memory Boom
Source: yahoo ·
Dell's stock plummeted 6% while Western Digital's rose 5%, highlighting the divergent fortunes of memory suppliers and AI hardware manufacturers.
Key takeaways
- Dell Technologies fell 6% in midday trading, while Western Digital rose 5% as memory and storage stocks rallied.
- Micron Technology's blowout quarterly results validated elevated storage valuations and pricing power for suppliers.
- Dell's gross margin compressed from 21% to 18% last quarter, and memory costs threaten to deepen that squeeze.
- Western Digital's non-GAAP gross margin reached 51% in its most recent quarter, with revenue up 46% year over year.
- Dell's drop today reflects the flip side of the memory squeeze, with rising prices translating into input-cost pressure for its box-maker business.
Why it matters
The divergence between memory and storage stocks, such as Western Digital, and assemblers and hardware makers, like Dell, highlights the complexities of the AI hardware trade. As the market continues to accelerate AI capital spending, the pricing power of suppliers and the input-cost pressure on assemblers will remain key themes. This dynamic has significant implications for the sector, with potential winners and losers emerging in the process. Investors will need to carefully consider these factors as they navigate the AI hardware trade in the coming months.
What to watch
- Western Digital's upcoming earnings date is expected to be in August, which may provide further insight into the company's performance.
- Dell Technologies' August earnings will also be closely watched, as investors seek to understand the company's margin math and how it will navigate the memory cost squeeze.
- The rotation of capital toward AI buildout suppliers, such as Western Digital, may continue, with potential implications for the broader sector.