Episode summary
Caterpillar Warns Tariff Impact Bigger Than Previously Seen | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Paul Sweeney · Guests: Woo Jin Ho, Christopher Ciolino, Bin Ren, Bess Freedman
Summary
Dell’s AI server business remains strong, but the market reacted badly because the mix is still margin-dilutive. Bloomberg Intelligence’s technology analyst said Dell expects AI server revenue to rise to $20 billion in fiscal 2026, yet those systems carry lower gross margins than traditional servers and storage, so the near-term EPS benefit is limited. He argued that the bigger payoff should come later, as Dell sells more into enterprises rather than heavily discounted hyperscale and neo-cloud deals.
On Caterpillar, Bloomberg Intelligence’s machinery analyst said tariffs are now expected to cost as much as $1.8 billion in 2025, a larger burden than previously guided, largely because of expanded steel and aluminum coverage and some India reciprocal rates. He still sees that as manageable and possibly the peak headwind, with pricing and cost actions more likely to help in 2026. He also pointed to record backlog and strong orders as signs that Caterpillar’s earnings can bottom this year and improve in 2026 and 2027.
The AI discussion broadened to Nvidia and custom AI in finance, where a founder said bespoke agents are needed because financial data is private, messy, and numerically demanding. The housing segment remained cautious: a real estate CEO said buyers and sellers are still misaligned, affordability remains strained, and builders are sensitive to policy and market psychology.
Key takeaways
- Dell’s AI server revenue outlook is strong, but the analyst said the business is still margin-dilutive and helps EPS less than investors hoped.
- Dell is likely to benefit more over time if AI server sales shift from hyperscale and neo-cloud customers to enterprise buyers.
- Caterpillar now expects tariffs to cost as much as $1.8 billion in 2025, with steel and aluminum the main pressure point.
- The Caterpillar analyst said backlog and orders remain strong, supporting the view that earnings can bottom this year and improve in 2026 and 2027.
- A founder of an AI software firm said finance needs bespoke AI agents because public-model tools struggle with private data and numeric workflows.
- The housing CEO said affordability, high rates, and cautious sellers are still keeping the market frustrating despite pockets of strength.
Notable quotes
“the AI numbers for AI server numbers were better than expected in the quarter and they also raised their guidance by another full year guidance by another five billion”
“AI servers uh they're they're closer to the the mid teens range, right? So from an operating margin standpoint, it actually is somewhat earnings dilutive”
“Cat thinks these tariffs could be, you know, up to a $1.8 billion impact in 2025”
“we're still quite optimistic that earnings are going to bottom this year”
“I think people now hundreds of millions of people have used um CHBT. So we all have a good idea of you know what a chatbot can do for us”
How the episode opens
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Listen on demand wherever you get your podcasts or watch us live on YouTube. Dell reported fewer sales of AI servers, lower profit margins than expected. That's really taken a toll on shares.
They're down about 9%. So, we want someone who could break it all down for us. Let's bring in Wuen Ho, Bloomberg Intelligence senior technology analyst joining us from Princeton.
Wujun, welcome back to the show. I I want to start broader. So, taking these results into consideration.
I mean, is it showing that the AI rally has has more room to run or not? I mean, what what are you hearing
Um in in terms of um the AI rally in general? I mean we saw Nvidia's numbers and Nvidia is actually doing uh quite well. I mean if you X out the China um outlook right um the demand is still robust.
U and and this actually flows through to Dell. Uh if anything um the AI numbers for AI server numbers were better than expected in the quarter and they also raised their guidance by another full year guidance by another five billion. So instead of 15 billion for the year, they're expecting 20 billion for the year.
And as more of these sovereign and neo cloud deployments are ramping up, you know, 2026 AI server revenue should be better for Dell, uh, given how they're positioned.
So then, can you try to explain why this stock is down 9%. I mean, Dell just said it now plans to ship 20 billion dollars of artificial intelligence servers in fiscal 2026, double what it sold last year.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- tariffs impact
- ai server demand
- nvidia valuation
- real estate housing market
- machinery earnings risk
Companies and tickers mentioned
- DELL
- CAT
- NVDA
- Dell
- Caterpillar Inc.
- SigTech
- Nvidia
- Brown Harris Stevens
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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