A senior data infrastructure analyst says investors shouldn’t expect linear quarterly growth related to the adoption of artificial intelligence (AI) technology by companies such as Dell Technologies Inc., as we’re in the early stages of a yearslong AI rollout.
Simon Leopold, managing director at Raymond James, told BNN Bloomberg that despite a sharp selloff of Dell stock following disappointing third-quarter earnings on Tuesday, he remains bullish on the company over the long term.
“What I think is really being overlooked here is in this AI cycle, it’s not going to be that every quarter will be up and to the right, there’s lumpiness,” he said in a Wednesday interview.
Dell said on Tuesday that its total revenue for the third quarter increased 10 per cent to US$24.4 billion, below the average estimate of $24.6 billion by Bloomberg-tracked analysts. The company said it shipped $2.9 billion in AI-optimized servers, down from the previous quarter.
Meanwhile, the company’s cornerstone personal computer (PC) business declined by one per cent to $12.1 billion in the quarter, also falling short of estimates. Dell shares were down more than 12 per cent in midday trading in New York on Wednesday.
Leopold noted that the company also lowered its outlook for the fourth quarter, which he said was just one of “several factors that surprised the market” to the downside, leading to Wednesday’s selloff.
However, the weakness in consumer demand for PCs may soon turn a corner, Leopold argued.
“Consider the fact that roughly four years ago, we had the pandemic, and the PC market spiked massively. Subsequently, the market declined which is normal following that massive spike,” he said.
“But those PCs are now four years old and so typically we see PCs getting replaced after about four years.”
On the AI side, Leopold said he expects things to “ramp (up) nicely” in the back half of next year as chipmaking giant Nvidia produces its next generation of products.
Last month, Dell announced plans to start shipping servers with Nvidia’s new Blackwell semiconductors.
“We continue to remain very hopeful about the next fiscal year and as a matter of fact, our fiscal 2026 earnings estimates did not change with (Tuesday’s) revision,” Leopold said.
With files from Bloomberg News