Key Points
Dell stock initially surged 8.4% after Super Micro’s co-founder was arrested on federal charges for allegedly smuggling $2.5 billion worth of AI servers to China.
Dell stands to benefit competitively as both companies build AI servers with Nvidia chips.
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Dell Technologies (NYSE: DELL) surged roughly 8.4% on Friday before falling back, finishing the day up 2.2%.
The stock jumped initially after news broke that rival Super Micro Computer‘s co-founder was arrested on federal charges. It retreated from its high later in the day’s trading, unable to escape the larger market slide. The S&P 500 fell 1.6%, and the Nasdaq Composite lost 2.1%.
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Super Micro’s legal crisis is Dell’s gain
The U.S. Attorney’s Office for the Southern District of New York charged Super Micro co-founder Yih-Shyan “Wally” Liaw and two associates with allegedly smuggling $2.5 billion worth of its AI servers to China in violation of U.S. export controls. Liaw was taken into custody on Thursday. SMCI shares cratered 33.3% on the news.
Dell’s fastest-growing business segment competes directly with Super Micro — both build AI servers filled with Nvidia chips — and the allegations will likely prompt Super Micro customers to look elsewhere.
Image source: Getty Images.
The fundamentals back it up
Dell’s AI server revenue hit $9 billion last quarter, up 342% year over year, and the company has a backlog in the dozens of billions.
If the macroeconomic picture looked differently, I might feel otherwise, but I don’t think this is the time to be making new investments in AI-related stocks. Valuations are stretched, and a recession could be very painful for the sector.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
