Evercore ISI says Tesla is Dell's new big AI customer, raises stock target

Analysts at investment firm Evercore ISI raised their price target for Outperform-rated Dell (NYSE: DELL) to $165 from $140 in a note Thursday, stating that they believe the company has won a large portion of business for Tesla’s AI server buildout.

According to Evercore, this should be incremental to their current ~$2.9 billion AI backlog but was likely embedded in their pipeline commentary.

"Tesla (NASDAQ: TSLA) has indicated that they expect to increase their compute capacity (H100 or equivalents) from ~35,000 H100 or equivalents installed today to ~85,000 by year-end," explains the firm. "Our analysis suggests this presents a ~$2.5-3.0B revenue/order opportunity for DELL potentially in CY24."

Furthermore, while Evercore believes that SMCI has also won some of the Tesla AI server business, the allocations are said to be heavily skewing towards Dell.

"Crucially, DELL has also won a sizable amount of storage attach in addition to AI servers that could ship in conjunction with AI server shipments (vs. storage typically lagging x86 server deployments by 2-3 quarters)," adds Evercore. The firm believes Dell has positioned itself to aggressively take share of the tier 2 cloud service provider, sovereign, and enterprise markets for AI infrastructure.

They conclude: "Dell continues to pick up traction for AI servers, and more importantly, AI attach. This should help support a structural lift to Dell’s underlying top-line growth rate from 3-4% to MSD over the next few years."

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