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Dell Soars Most in Two Years on Outlook Fueled by AI Servers · Bloomberg Intelligence

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  Speaker 2: All right, let's talk about something that's moving in the
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  Speaker 2: opposite direction, and that would be shares of Dell. Once
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  Speaker 2: Dell Computer and of course now it's just Dell Inc.
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  Speaker 2: Because it sells so much more than just PCs. Woojinhoe
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  Speaker 2: is our senior hardware and networking analyst, and Woojin the
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  Speaker 2: story for Dell, the story for investors who want to
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  Speaker 2: buy Dell is all about its AI servers, and on
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  Speaker 2: that front, things are looking pretty good.
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  Speaker 3: Hey Scarlett, Yeah, look, things are looking fantastic for the
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  Speaker 3: AI servers are They raise their aiserver guidance by about
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  Speaker 3: twenty percent from fifty billion dollars for this year to
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  Speaker 3: sixty billion dollars even only distributed.
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  Speaker 1: By the way.
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  Speaker 3: But you know, there's a broader piece of the story
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  Speaker 3: as well. If we look at the guidance, they raised
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  Speaker 3: their guidance by about twenty five to twenty seven billion
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  Speaker 3: dollars ten billion of the increase was AI servers, but
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  Speaker 3: everything else it you know, traditional servers PCs, that's doing
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  Speaker 3: a lot better than expected, and that's I think that's
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  Speaker 3: the piece that some people are missing here.
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  Speaker 4: Jendell now sees a sixty billion dollar AI server opportunity.
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  Speaker 4: How sustainable is that level of growth?
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  Speaker 3: Look, well, the way I have the modeled right now,
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  Speaker 3: you know, prior to results, it was fifty billion, and
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  Speaker 3: then growing another twenty five billion off of that, I'd
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  Speaker 3: be twenty five doll percent off of that fifty billion.
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  Speaker 3: So what's happening is that we're seeing these neo clouds
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  Speaker 3: as well as some of these sovereigns place multi billion
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  Speaker 3: dollar AI server deals. And if you think about it,
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  Speaker 3: we're only at the beginning phases of adoption of AI servers,
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  Speaker 3: and as more of these neo clouds and sovereign start
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  Speaker 3: adding capacity, Della's probably on the front of the line
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  Speaker 3: providing that equipment.
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  Speaker 2: Della is a hardware maker, which means, like other hardware makers,
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  Speaker 2: it has to grapple with higher costs for higher input costs,
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  Speaker 2: including memory chips. How is the company dealing with that?
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  Speaker 5: So far?
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  Speaker 2: Has it had to in any way eat anything in
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  Speaker 2: terms of margin.
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  Speaker 3: Hey, Scarlett, I think when we spoke yesterday, I asked
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  Speaker 3: if you put your PC yet?
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  Speaker 2: No I haven't. I guess I'm too late.
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  Speaker 6: Now.
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  Speaker 3: Well, look all right, so let's go down down the line.
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  Speaker 3: Dell's not absorbing it as much as we think, right,
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  Speaker 3: Gross margins are actually going up, as a matter of fact,
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  Speaker 3: and they're passing through a lot of the input costs
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  Speaker 3: to customers. On the AI server side that's being passed
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  Speaker 3: through because it is high in demand. But margins are low.
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  Speaker 3: Operating margins are low, and that is this. So that's
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  Speaker 3: fine there, But what's happening in the first half of
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  Speaker 3: this year traditional servers? You know, we're hearing you know,
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  Speaker 3: server deals, server costs that are up two hundred to
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  Speaker 3: three hundred percent because of the higher input costs and PCs.
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  Speaker 3: You know, second half of this year, you're you know,
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  Speaker 3: a coppable PC is going to be a twenty percent
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  Speaker 3: on a year and year basis in the second half.
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  Speaker 4: So is AI demand offsetting weakness in other parts of
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  Speaker 4: the PC market or is it actually creating new revenue streams?
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  Speaker 3: You know that that that's a really good question and
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  Speaker 3: that's something I think part of the story here in
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  Speaker 3: terms of re rating the multiple. If we think about
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  Speaker 3: it like AI demand in itself, like AI server demand
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  Speaker 3: in itself, you know that eventually is going to mature.
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  Speaker 3: But one of the things that it may happen over
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  Speaker 3: the next couple of years is that as corporates are
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  Speaker 3: adopting AI, we are going to see a bigger demand
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  Speaker 3: in traditional servers going forward with higher asps by the way,
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  Speaker 3: and that is going to not only reinvigorate companies like Dell,
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  Speaker 3: but like Hpe as well as Lenovo going forward.
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  Speaker 2: But we haven't seen that tailwind yet for the hps,
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  Speaker 2: hpees and Lenovo's yet have.
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  Speaker 3: We Well, Lenovo, we started to see a pickup, but
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  Speaker 3: I don't know if that's more fun and you know,
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  Speaker 3: you know, front end loaded purchases because of the component cause.
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  Speaker 3: But that's an emerging story that might come out over
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  Speaker 3: the next couple of years.
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  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
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  Speaker 4: So the AI arms race is in full swing. Anthropic
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  Speaker 4: has reportedly raised capitalists at a staggering nine and sixty
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  Speaker 4: five billion dollar valuation, surpassing Open AI. With us. To
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  Speaker 4: discuss this, we have man Deep Singh. He is global
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  Speaker 4: head of Technology research for Bloomberg Intelligence. Man Deep, does
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  Speaker 4: this feel like a rational buildout of AI infrastructure or
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  Speaker 4: are things getting a little bit excessive with all these
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  Speaker 4: milestone numbers we're hearing about every.
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  Speaker 2: I love how you just went right for it.
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  Speaker 7: I mean, look, and Thropics started off the year at
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  Speaker 7: a nine billion dollar rund rate. They put out a
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  Speaker 7: press release yesterday that they are at a forty seven
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  Speaker 7: billion dollar run rate. In a span of five months,
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  Speaker 7: the revenue arr has grown five hundred percent. So I
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  Speaker 7: think that says it all in terms of what's justifying
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  Speaker 7: this enthusiasm. Now, are all of them long term winners?
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  Speaker 7: I would bet no. But right now market is rewarding
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  Speaker 7: AI narratives, and you know we saw that Vedell last night.
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  Speaker 7: Any company that has an AI story is getting bid up,
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  Speaker 7: and obviously you have to show it in the numbers
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  Speaker 7: and the guidance in the acceleration, but you know, the
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  Speaker 7: KAPEX numbers are going up because of this five x
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  Speaker 7: increase in Entropics err and so right now there is
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  Speaker 7: a frenzy in terms of building the AI infrastructure because
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  Speaker 7: there is clear monetization that Ententropic is showing in their
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  Speaker 7: revenue numbers.
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  Speaker 2: Okay, let's be clear. Anthropic is private, and this fundraising
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  Speaker 2: round keeps them private, but everyone's anticipating that at some
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  Speaker 2: point they will go public. Do they need to go
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  Speaker 2: public because they've held on this long and they haven't
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  Speaker 2: had to go public. Did they want to go public?
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  Speaker 7: I think so their investors clearly, the ones who financed
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  Speaker 7: this sixty five billion dollar round and the earlier once.
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  Speaker 7: You know, when you talk about a company close to
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  Speaker 7: a trillion dollar market cap in the private market, I
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  Speaker 7: mean I go back to Uber's you know ipo. Uber
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  Speaker 7: wasn't as big as Entropic and open Aire, but you know,
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  Speaker 7: they obviously had a lot of growth behind them. When
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  Speaker 7: they went public, the company wasn't profitable, and you know,
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  Speaker 7: there was a lot of concern about the cash burn.
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  Speaker 7: I feel something similar may happen here. Even though these
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  Speaker 7: companies are growing very fast and clearly. You know, they're
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  Speaker 7: part of this big technology shift that is underway. But
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  Speaker 7: at some point, I think people will start to focus
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  Speaker 7: on their profitability and that's where you know, this business
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  Speaker 7: model being so capital and intensive, unlike the software companies
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  Speaker 7: that you know we've seen in the past. I think
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  Speaker 7: the concern around profitability will surface. But for now, everyone
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  Speaker 7: is focused on the top line growth, and you know,
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  Speaker 7: the air are kind of increases that we're seeing with
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  Speaker 7: all of them, really because coding agent as a use
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  Speaker 7: case is huge and it is a big addressable market
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  Speaker 7: and everyone wants to get her to That is.
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  Speaker 4: Having access to compute power becoming the biggest competitive advantage
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  Speaker 4: when it comes to building out AI.
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  Speaker 7: Well that's what Jensen Wong says, computer is revenue. I'm
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  Speaker 7: paraphrasing him, and I think right now that is the case.
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  Speaker 7: Look at what SpaceX is doing with XAI data centers.
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  Speaker 7: They were training their own model. Now with their S
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  Speaker 7: one filing, they're saying they will be renting that compute
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  Speaker 7: to guess who, anthropic and so, and they will generate
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  Speaker 7: fifteen billion revenue per year out of just renting the
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  Speaker 7: compute because they build the data centers that no one
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  Speaker 7: else has. They have the compute, and even though they
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  Speaker 7: are behind when it comes to training their own models,
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  Speaker 7: but they can rent it out the compute in the
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  Speaker 7: meantime and generate fifteen billion dollars in revenue out of that.
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  Speaker 2: Alex mentioned it earlier that Anthropic raising at a nine
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  Speaker 2: hundred and sixty five billion dollar valuation makes it bigger
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  Speaker 2: than open Ai. It feels like this is open AI's
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  Speaker 2: race to lose at this point.
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  Speaker 7: Clearly, I think they are under a lot of pressure.
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  Speaker 7: And in terms of who files for, you know, going
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  Speaker 7: public first, my guess is open Ai would want to
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  Speaker 7: do it first because they want to own the narrative
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  Speaker 7: as opposed to you know, Entropic going first and everyone
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  Speaker 7: realizing you know, obviously, and Thropic is growing faster than
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  Speaker 7: open ai right now, and if they take all the
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  Speaker 7: liquidity away, then open Ai coming in later will struggle,
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  Speaker 7: you know, in terms of just making sure that they
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  Speaker 7: have investors excited about investing in open AA and Mandy.
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  Speaker 4: One more question for you, Apollo is reportedly helping finance
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  Speaker 4: AI chip purchases. What does that tell us about how
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  Speaker 4: capital intentsive this race has become?
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  Speaker 7: Well, so for all the neo clouds, whether it's Core, Viv,
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  Speaker 7: nebs outside of the hyperscalers, whoever is renting the GPUs,
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  Speaker 7: they don't have the balance sheet to buy, you know,
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  Speaker 7: these ex defensive chips or servers, and so in those
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  Speaker 7: type of instances, that's where the pe guys like Apollo
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  Speaker 7: Blackstone they come in and they're helping finance those deals
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  Speaker 7: because you know, there are a lot of neo clouds
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  Speaker 7: that are growing very fast and for them to sustain
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  Speaker 7: this kind of growth rate, they have to keep building
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  Speaker 7: the infrastructure, keep getting the chips, and these are getting
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  Speaker 7: financed by the lights of Apollo.
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  Speaker 4: Stay with us.
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  Speaker 2: More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple Coarclay and Android
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• 10:47
  Speaker 8: And Hi everybody, I'm John Tucker. This is Bloomberg Intelligence
• 10:51
  Speaker 8: along with Alex Simonova. We have lots of Space news.
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  Speaker 4: Alex a lot going on. We have SpaceX cutting its
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  Speaker 4: IPO valuation to one point eight trillion dollars. Still an
• 11:03
  Speaker 4: exorbitant number, and of course Blue Origins rocket exploding. That
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  Speaker 4: was big news overnight.
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  Speaker 8: Yeah, and when we talk space we go to the
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  Speaker 8: guy who puts space in aerospace, George Ferguson joining us
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  Speaker 8: right now. Let's let's start off with the explosion. George, Man,
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  Speaker 8: you took it about kaboom? What what happened with this thing?
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  Speaker 5: Do we know?
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  Speaker 6: Yeah, apparently they're testing out one of the rocket engines
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  Speaker 6: and they had a very extreme failure.
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  Speaker 5: And so look, I think it.
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  Speaker 6: You know, we saw that Blue Origin had a similar
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  Speaker 6: problem back in April when it was trying to lift
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  Speaker 6: some ASTM satellites into orbit. One of the one of
• 11:43
  Speaker 6: the rockets sitting fire correctly and didn't get those satellites
• 11:46
  Speaker 6: into the right orbit level. And so you know, we're
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  Speaker 6: I think we're three deep. We were getting ready for
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  Speaker 6: the fourth Blue Origin launch. Clearly Blue Origin has some
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  Speaker 6: work to do on the new new gun rocket.
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  Speaker 5: I think it reminds us.
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  Speaker 6: That this isn't as easy easy as it looks. SpaceX
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  Speaker 6: has been relatively successful in the launch business, actually more
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  Speaker 6: than relatively very successful, launching one hundred and sixty Coast
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  Speaker 6: one hundred and seventy rockets last year, and it looks
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  Speaker 6: like they've got a really big lead on their nearest competitors.
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  Speaker 5: Can these guys ever compete with SpaceX?
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  Speaker 6: Look, I think that it's a function of money, right.
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  Speaker 6: I think that money into R and D can close
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  Speaker 6: the gap over time, But I think it'll take a
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  Speaker 6: considerable amount of time. Bezos definitely has plenty of money,
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  Speaker 6: but it's going to take considerablemount of time.
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  Speaker 4: And then, George, speaking of SpaceX, I want to talk
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  Speaker 4: to you about this news about them lowering their valuation
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  Speaker 4: target one point eight trillion dollars still a massive number.
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  Speaker 4: How do investors even begin to value a company like SpaceX?
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  Speaker 9: Yeah?
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  Speaker 6: I mean, gee, where they took a little bit, They
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  Speaker 6: took the cherry off the top of the Sunday there.
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  Speaker 5: I think.
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  Speaker 6: I feel like they're trying to set themselves up for
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  Speaker 6: success in the IPO. You know, at Bloomberg Intelligence, we've
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  Speaker 6: looked at some of the parts on the business, and
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  Speaker 6: so if you take rocket Lab as the major space
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  Speaker 6: launch sort of competitor, public competitor, they're valued ninety times revenue. Now,
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  Speaker 6: SpaceX's space business comes in a little bit light on
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  Speaker 6: revenue because they don't book revenue for internal work. When
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  Speaker 6: we back that out, we give them eleven or twelve
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  Speaker 6: billion dollars in revenue from internal launch, they probably have
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  Speaker 6: a little bit over a billion dollars with the value
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  Speaker 6: based on Rocket Labs valuation. Right, I'm not saying that's
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  Speaker 6: the right price. I don't know what the right price
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  Speaker 6: is for a rocket launching business because it is a
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  Speaker 6: relatively new endeavor to be done. I think, you know,
• 13:49
  Speaker 6: to be finest in public markets. And then when my
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  Speaker 6: colleagues out in the tech side of Bloomberg Intelligence and
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  Speaker 6: in the satellite communications side of Intelligence, when they look
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  Speaker 6: at those businesses, they see another billion dollars. I think
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  Speaker 6: it's like six hundred billion for the satellite constellation and
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  Speaker 6: four hundred billion for for the AI business. So so look,
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  Speaker 6: I feel like there are comps out there that could
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  Speaker 6: probably get that could lead the way to the valuation
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  Speaker 6: of something around do trillion. Again, I feel like maybe
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  Speaker 6: they lower the number a little bit to make sure
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  Speaker 6: that they overperform. And again I think you've got to
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  Speaker 6: buy into the dream of long term, much cheaper lift
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  Speaker 6: data centers in space, you know, connectivity of your phone
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  Speaker 6: into into satellites. You've got to buy into that dream,
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  Speaker 6: and I think you've got to go a distance before
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  Speaker 6: you're going to turn it into a valuation that looks
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  Speaker 6: anything like what we typically have in markets for sort
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  Speaker 6: of normal companies.
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  Speaker 5: Now, be honest with me. You read the filing. How
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  Speaker 5: weird is it?
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  Speaker 6: He's a dreamer's Elon Musk is a big dreamer. I
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  Speaker 6: guess it's great that some of us do this, right.
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  Speaker 6: I didn't wake up one day and decided I want
• 15:05
  Speaker 6: to build my own spaceport. I mean I wanted to,
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  Speaker 6: but I didn't think I'd get anywhere on it, and
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  Speaker 6: I didn't. So I think he's a big dreamer. Again,
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  Speaker 6: you got to buy into that, and you know, and
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  Speaker 6: colonizing Mars and all these things. I think you've got
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  Speaker 6: to sift and sort of bit through some of that
• 15:19
  Speaker 6: stuff and look at what they have now and what's
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  Speaker 6: at hand now. And look, I don't put past having
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  Speaker 6: data centers in space one day. It seems like it's
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  Speaker 6: a natural place. It seems like if you if you
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  Speaker 6: start working on that technology, it's something you can get done.
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  Speaker 6: And again, you've got a rocket company here that launched
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  Speaker 6: one hundred and sixty one hundred and seventy rockets last year,
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  Speaker 6: far and away larger than any other company launching in
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  Speaker 6: the marketplace. He's come a long way.
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  Speaker 4: And George very quickly is Elon Musk being a dreamer
• 15:52
  Speaker 4: part of the appeal for investors when it comes to SpaceX,
• 15:55
  Speaker 4: because when you look at a company company like Tesla,
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  Speaker 4: it's not like investors are investing in it based on
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  Speaker 4: traditional evaluation metrics.
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  Speaker 6: Yeah, I think you have to totally believe in Elon
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  Speaker 6: Musk and his dreams in order to get involved in this.
• 16:09
  Speaker 6: And I'm going to point out even when you look
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  Speaker 6: at Tesla, right, when's the last time we had a
• 16:13
  Speaker 6: new car company in the US? We have an added
• 16:16
  Speaker 6: for decades, the same three car companies have been sort
• 16:20
  Speaker 6: of dividing the market up and shrinking as foreign competition
• 16:23
  Speaker 6: comes in for decades. And this man created a brand
• 16:27
  Speaker 6: new car company. So yes, you got to believe in that.
• 16:30
  Speaker 5: And there when does this thing price again? It's next week? Right? Yeah?
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  Speaker 5: I think it is. I think it's next week.
• 16:36
  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
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  Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
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• 16:58
  Speaker 2: Let's turn our focus now to dive technology. Our team
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  Speaker 2: here at Bloomberg Intelligence has come out with a twenty
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  Speaker 2: twenty six outlook on wearable monitors and pumps and how
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  Speaker 2: they are set for double digit growth through the end
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  Speaker 2: of the decade. Matt Henrik sin And pleased to say
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  Speaker 2: is here with us in New York as well. So, Matt,
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  Speaker 2: which companies would stand to benefit from this double digit growth?
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  Speaker 5: Then?
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  Speaker 9: Yeah, I think there's two segments to think about.
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  Speaker 1: Those.
• 17:21
  Speaker 9: First, the continuous glucose monitors and that's the sensor you
• 17:24
  Speaker 9: wear in your arm and that measures your gluecose levels.
• 17:27
  Speaker 9: That is Dex Common Abbot have that doopoly. And then
• 17:30
  Speaker 9: there's insulin pump market, which is what the devices actually
• 17:33
  Speaker 9: that deliver insulin to the patient once they figure out
• 17:36
  Speaker 9: what their gluecose levels is, and that is the insulate.
• 17:40
  Speaker 9: That's the Beta Bionics, Mini med tand of diabetes. So
• 17:44
  Speaker 9: that's a more crowded market, but those are kind of
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  Speaker 9: the mage four players there.
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  Speaker 4: You mentioned in your report that product approvals clinical trials
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  Speaker 4: and reimbursement changes will disrupt this market. Can you talk
• 17:55
  Speaker 4: to us a little bit more about that.
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  Speaker 9: Absolutely, and so from the product side, it's just a
• 17:59
  Speaker 9: continuous level of innovation that goes on from one generation
• 18:03
  Speaker 9: to the next. Just think about your iPhone, you know,
• 18:05
  Speaker 9: the iPhone six and IFO seventeen. Both dex Common Abbit
• 18:08
  Speaker 9: are creating new versions of their cgms, same with the
• 18:11
  Speaker 9: insulin pump markets. And then the reimbursement is actually the
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  Speaker 9: biggest one because when we did our analysis for the
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  Speaker 9: twenty thirty market outlook, it's the adoption into the type
• 18:21
  Speaker 9: two diabetic patients and they're a less sicker cohort of
• 18:25
  Speaker 9: the overall diabetic patient group. And one of the key
• 18:30
  Speaker 9: hurdles to get over is reimbursement that CMS and the
• 18:33
  Speaker 9: insurers will pay for that. Dex Common, abboit are creating
• 18:36
  Speaker 9: or working on clinical data to prove the benefit of
• 18:39
  Speaker 9: cgms for those patients. Once that data gets published. Dexcom
• 18:44
  Speaker 9: has THEIRS coming out next week at the ADA Diabetes
• 18:47
  Speaker 9: Conference in New Orleans that should help CMS or convince
• 18:51
  Speaker 9: CMS to be able to start reimbursing or paying those
• 18:54
  Speaker 9: patients for those cgms to have a pain.
• 18:57
  Speaker 6: Out of pocket.
• 18:58
  Speaker 2: Is this a market gets disrupted by AI?
• 19:01
  Speaker 5: Does a I help it or hurt it?
• 19:02
  Speaker 9: It helps? So these companies are creating their own algorithms
• 19:07
  Speaker 9: to be able to for the CGM side, be able
• 19:09
  Speaker 9: to detect the glucose and try to be proactive in
• 19:13
  Speaker 9: where the glucose trends are going. Insulin pumps the same thing.
• 19:17
  Speaker 9: They're trying to figure out the exact amount of insulin
• 19:20
  Speaker 9: to deliver, because if you deliver too much insulin, that's
• 19:22
  Speaker 9: almost as more dangerous than not delivering enough insulin. So
• 19:25
  Speaker 9: it's trying to find that perfect balance. AI and big
• 19:29
  Speaker 9: data kind of as you look through millions and millions
• 19:32
  Speaker 9: of kind of glucose levels, helps them be able to
• 19:35
  Speaker 9: be more accurate with the insulin delivery.
• 19:37
  Speaker 4: It's been rumored for many years now that the Apple
• 19:40
  Speaker 4: Watch will eventually gain a non invasive blood sugar monitor.
• 19:44
  Speaker 4: Where are big tech play big tech companies playing a
• 19:47
  Speaker 4: role here, Yeah.
• 19:48
  Speaker 9: And that's been going on for years. What we're seeing
• 19:51
  Speaker 9: currently is it's still very very far before a sensor
• 19:57
  Speaker 9: from outside the skin can actually measure bluecost levels. What
• 20:01
  Speaker 9: you're starting to see more and more actually is there
• 20:03
  Speaker 9: some privately held companies on what is called biolink, and
• 20:06
  Speaker 9: they're getting approval for a sensor that has a smaller needle,
• 20:11
  Speaker 9: and so you're starting to see that type of technology first.
• 20:15
  Speaker 9: I wussily it gets there at some point down the road,
• 20:17
  Speaker 9: but as of right now, it's still kind of more
• 20:19
  Speaker 9: of a work in progress.
• 20:21
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