Episode summary
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Bloomberg Intelligence
· · 24 min · Hosts: Paul Sweeney, Scarlet Fu · Guests: Steve Man, Poonam Goyal, Mandeep Singh, Janet Lorin
Summary
Dell’s AI server demand is still strong, but the analyst argued the mix is pressuring profitability. Dell said it expects about $20 billion in AI server sales in fiscal 2026, yet the discussion focused on why that revenue can be earnings dilutive when AI servers carry mid-teen gross margins versus the 20s to 30s on traditional servers and storage. The analyst said the bigger upside should come over time as Dell sells more to enterprises rather than heavily discounted hyperscale and neo-cloud buyers, while still believing Dell is well positioned competitively.
Caterpillar’s warning that tariffs could cost as much as $1.8 billion in 2025 was framed as a manageable but real headwind. The analyst said steel and aluminum tariffs are the main driver, but still expects earnings to bottom this year and improve in 2026 and 2027, helped by a record backlog and solid order trends. Energy and transportation, especially power generation for data centers, was described as the strongest segment.
The episode also argued that AI adoption is accelerating, but finance needs bespoke tools because large language models struggle with private data and number-crunching. On housing, the guest said affordability, high rates and weak inventory are keeping the market frustrating, while institutional buyers and a 4 million-home shortage make conditions harder for individual buyers and renters.
Key takeaways
- The analyst said Dell’s AI server revenue is rising, but lower margins mean the mix can hurt near-term EPS and operating leverage.
- The analyst expects Dell’s profitability to improve later if more AI server sales shift from discounted hyperscale deals to enterprise customers.
- Caterpillar’s tariff bill could reach $1.8 billion in 2025, but the analyst still sees 2025 as the earnings bottom year.
- The analyst said Caterpillar’s data-center-driven power generation business is holding up best, while construction and mining are softer.
- The guest said AI use is growing fast, but capital markets need custom agents because financial workflows depend on private data and precise calculations.
- The housing guest said affordability remains poor because rates are still high, sellers are stubborn, and inventory is not yet balanced.
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”
“having AI sales is a double-edged sword. What you're getting in sales, uh, you kind of lose out on gross margin”
“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 are seeing unprecedented demand for AI services, AI inference”
How the episode opens
Bloomberg Audio Studios podcasts radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m.
Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. 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.
Uh 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 start 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 dollar 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
- tesla pay package
- elon musk compensation
- lululemon earnings outlook
- ai chip partnership
- us college turmoil
Companies and tickers mentioned
- TSLA
- LULU
- AVGO
- NVDA
- Tesla
- Lululemon
- Broadcom
- OpenAI
- Nvidia
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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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