Dell Applied sciences is among the world’s largest makers of non-public computer systems. It is also a significant participant in servers utilized in information networks, and meaning it is one of many huge beneficiaries from surging synthetic intelligence spending.
On November 25 the energy related to AI was on full show when Dell launched its third-quarter outcomes, exhibiting that server demand for AI surged, fueling gross sales and driving orders larger.
“Momentum has accelerated meaningfully in the second half of the year, building on an already strong first half. AI server demand remained exceptionally strong,” stated Dell Vice Chairman Jeffrey Clarke on the earnings name.
That is undeniably excellent news for Dell, however the firm’s energy additionally suggests an enormous tailwind supporting demand for pc reminiscence, together with high-bandwidth reminiscence bought by Micron.
Given hyperscaler and enterprise spending is predicted to speed up over the approaching years, and present reminiscence provide chain issues, Micron might discover itself inside one other reminiscence tremendous cycle.
Micron reminiscence demand is skyrocketing
Dell’s stellar quarter exhibits that server demand is not slowing. That is excellent news for Dell’s income, however administration additionally highlighted capability constraints related to reminiscence and signaled that reminiscence costs are rising as demand will increase.
Dell reported server orders destined for synthetic intelligence rose 150% in fiscal 2026 to $30 billion. Dell’s CFO, David Kennedy, says Dell will ship $25 billion this fiscal yr, and the energy is more likely to proceed subsequent yr.
Shutterstock&interval;
In a analysis notice shared with TheStreet, Morgan Stanley predicts that Dell’s AI server shipments will improve by one other 50% in fiscal 2027, reaching $37 billion.
The expansion means Dell might want to purchase extra of the merchandise it must construct into its servers, together with reminiscence, contributing to a possible worth “super cycle.”
“In our view, DELL properly contextualized how unprecedented this memory supercycle is, acknowledging its cost basis is going up for every product/that every product category will be impacted by memory inflation,” wrote Morgan Stanley analyst Erik Woodring.
Dell is not the one maker of those servers, both. With server gross sales rising industry-wide attributable to AI coaching and inference, the potential squeeze in reminiscence costs might be important.
“We’re in a very unique time. It’s unprecedented. We have not seen costs move at the rate that we’ve seen. And by the way, it’s not unique to DRAM. It’s NAND,” stated Dell Vice Chairman Jeffrey Clark on the earnings name.
Micron ramps high-bandwidth reminiscence spending to satisfy demand
Clark went on to say that “demand is way ahead of supply,” an issue that Micron is aware of.
Extra Tech Shares:
- Buyers hope excellent news from Nvidia provides the rally extra life
- Palantir CEO Karp simply settled main debate
- Spotify simply solved a significant drawback for listeners
- Amazon lawsuit might be a warning to different employers
In Micron’s newest quarterly replace, the corporate introduced a significant push to construct extra capability, notably for high-bandwidth reminiscence, which is greatest suited to AI purposes. The corporate elevated its fiscal 2026 capital expenditures steering to $18 billion from $14 billion to capitalize on unit and pricing upside.
“In fiscal 2025, Micron’s revenue grew nearly 50% to a record $37.4 billion,” stated Micron CEO Sanjay Mehrotra. “This performance was supported by the ramp of our high-value data center products and our broad-based DRAM pricing strength across end markets.
Data center sales were a record 56% of Micron’s overall revenue last quarter.
The money at stake is significant. Goldman Sachs analysts boosted their DRAM and NAND related capex estimates in October, according to a research note shared with TheStreet.
Specifically, it raised its DRAM wafer fab equipment spending estimates to $31 billion, $34 billion, and $34 billion for 2025, 2026, and 2027, respectively, reflecting 16%, 10%, and flat year-over-year growth. Previously, they were aiming for 5% growth each year. The analysts cited HBM competition and tight supply as being behind their higher targets.
It also upped its NAND equipment spending outlook to $13 billion and $14 billion, up 30% and 10% year over year, for 2026 and 2027.
Wall Street revamps Micron targets on growing memory demand and prices
Goldman Sachs raised its earnings targets for Micron on expectations for higher prices and stronger demand:
Micron increased its earnings per share outlook for 2026 by 10.9%, now expecting $18.59. In 2027, it raised its outlook by 25.6% to $19.09. In turn, it set Micron’s 12-month price target at $180, up from $145.
Goldman Sachs isn’t the only Wall Street research firm that’s ratcheted up expectations. Morgan Stanley analyst Joe Moore is more bullish, rating Micron an overweight. In early November, he lifted his Micron price target to $325 and made it a “high decide.”
“We’re getting into uncharted territory, as we have now a 2018 fashion scarcity forming however from a a lot larger EPS start line; we count on serial upwards revisions to proceed,” wrote Morgan Stanley’s Moore in a research note. “Since we upgraded MU to OW a little bit over a month in the past, DDR5 spot pricing has tripled and in a historic sense, to seek out this type of transfer in DRAM pricing you’d doubtless have to return to the cycles of the Nineteen Nineties.
Moore is modeling for Micron’s earnings per share to eclipse $25 subsequent yr.
Associated: Analyst says purchase the dip on this huge cap tech inventory (it isn’t Nvidia)
