Ted Zhang
Portfolio Manager of Turbotection at Revere Asset Management
Hardware vendors like HPE, HP and Logitech are now challenged as Micron locks more DRAM volume into strategic customer agreements rather than spot, since enterprises have less reason to pull in purchases when pricing is more certain. Supply-chain complexity winners like Dell are probably less advantaged too. The shift favors semicap names like Applied Materials and ASML if growth comes from bits rather than price, earns Micron a higher multiple for trading price for duration, and aids buyers. … Show more
Hewlett Packard Enterprise's 30% jump looks like dot-com bubble behavior, since the stock trades at about -250 times earnings. Even after a strong earnings report it remains a poor-quality company; Dell and Cisco earned their multiple expansion with great fundamentals and undervaluation. A post the author replies to argues HPE, which sells servers and networking, is a laggard rerating toward the leaders. x.com x.comÂ
Hewlett Packard Enterprise should get dual boosts from ANT and NVIDIA data-center buildouts. It has the lowest PEG and strongest year-over-year growth in the communications space. It is time to buy again, with the low 80s as the target. x.comÂ
Dell and HPE are priced on an AI-server story rather than their businesses. Like HP Inc., which just posted weak results on rising memory costs and thinner PC margins, they are cyclical hardware companies dependent on enterprise capex, yet their shares diverged only because of the AI-server label. Data center demand is real, but the premium has run far ahead of it. Such pricing can last long in a liquid, risk-on market, as in 1999 and 2021, so a drop is not imminent. x.comÂ
Hardware is squeezing software as enterprises redirect budgets to scarce servers, GPUs and storage, favoring semiconductors over software. IBM's Q2 revenue of $17.2B missed its $17.9B target, and its CEO said clients moved software and IT consulting budgets to secure rising-priced hardware. Microsoft, ServiceNow and Salesforce face near-term pressure while Dell and Micron benefit. Aehr Test's beat and raised guidance counter claims the chip cycle is dead. x.comÂ
Dell, Cisco and HPE are overlooked winners of the next AI wave because their installed bases will be key for tech infrastructure in the AI revolution. x.com x.comÂ
Dell looks overvalued, trading about seven turns above its historical multiple range and at a premium to many AI semiconductor bottleneck names despite not providing a bottleneck solution. Michael Dell spiking the ball on the latest quarter might mark the top. x.comÂ
Super Micro Computer should ride on Dell's results, since unlike Dell it has no legacy business, just the AI server business. x.comÂ
Dell and HPE benefit as enterprises accelerate capital spending on AI-ready infrastructure, a near-term tailwind for traditional server vendors. Sustained demand for compute and storage capacity supports both companies' hardware and systems businesses and is driving IT hardware outperformance. x.comÂ
Dell is still a hardware company with low pricing power and only an 18% margin profile, which the FOMO chasers now piling in overlook. The stock may still go higher. x.comÂ