Protecting Your Investment in Artificial Intelligence: A Comparison of Dell Technologies and Amazon
Artificial Intelligence (AI) has been the talk of the town in the business world for quite some time now, and it doesn't seem like it's losing steam anytime soon. Among all the trends that have made waves in the market lately, AI, particularly generative AI, has managed to add significant value to users, whether they're tech-savvy or not.
In the race to capitalize on this AI boom, several companies have emerged as contenders. One of the most talked-about names is Nvidia, but there are other players in the game as well, such as Dell Technologies and Amazon. If you're looking to invest in an AI stock, which one should you go for?
A legacy tech giant set to cash in on a rival's missteps
Keith Noonan: Dell Technologies has been racking up impressive growth figures, thanks to its strong performance in the AI server market. In its most recent financial report, the company's overall revenue saw a 9% increase to $25 billion, while revenue for its infrastructure solutions segment skyrocketed by 38% to $11.6 billion. Within the segment, revenue generated from servers and networking increased a whopping 80% to $7.7 billion. With such impressive growth in the product category, there's plenty of room for further growth.
What makes Dell even more attractive is its position to capitalize on the missteps of one of its biggest competitors. Super Micro Computer (also known as Supermicro) was once the king of the high-performance server market, but the company has been plagued by some self-inflicted setbacks.
Supermicro's auditor resigned last month, citing concerns about the company's representations and financial statements. The company had already delayed filing its annual 10-K report with the Securities and Exchange Commission (SEC) before the auditor resigned, and it eventually had to delay the filing of its 10-Q report for the first quarter of its current fiscal year.
Supermicro's financial woes have not only hurt the company's reputation but also tanked its stock price, which has fallen by more than 60% in the past month alone. The company's missteps also seem likely to have a significant impact on its business performance and competitive positioning.
As a response to the controversy and uncertainty, reports suggest that Nvidia has begun redirecting orders that were meant for Super Micro Computer to other companies. Nvidia's graphics processing units (GPUs) are a crucial part of Supermicro's most advanced servers, and Supermicro has historically been one of Nvidia's top three customers.
With Supermicro struggling, Dell seems poised to gain significant market share in the high-performance server market and potentially emerge as the market leader. Given the shifting dynamics in the AI server niche, investing in Dell looks like a smart move at this point.
A cloud giant with hardware ambitions
Jennifer Saibil: Amazon is best known for its unbeatable e-commerce business, but it also has a sizable presence in the cloud computing segment through Amazon Web Services (AWS). However, just like any other tech giant, Amazon is always on the lookout for opportunities to create a dominant business.
With the rise of generative AI, Amazon saw a chance to expand its AWS offering by breaking into the hardware market. The company has become the go-to destination for connected devices, like its Alexa digital assistant, Echo smart speakers, and Kindle e-readers.
Amazon is leveraging Nvidia's GPUs to offer powerful generative AI services for AWS clients. These services cater to developers who are creating their own large language models (LLMs), which serve as the backbone of generative AI.
Amazon's AI services are meant for developers at different levels. The bottom tier is for developers who want to create their own LLMs from scratch, the middle tier is for developers who need semi-custom options based on Amazon's LLMs, and the top tier is for small businesses looking for affordable but high-quality options.
In its Q3 earnings report, Chief Executive Officer Andy Jassy stated that Amazon's AI business already has a multibillion-dollar annual run rate, and this is just the beginning. Amazon's AI services aren't just for developers; they can also create full-fledged marketing campaigns, including print, video, and audio, based on prompts and images.
As the excitement around generative AI continues to grow, there's also an uptick in the overall cloud business. Companies that were initially cutting back on their cloud spending due to inflation concerns are now realizing that they need to be a part of the generative AI revolution. As a result, they're switching to AWS services, with AWS revenue seeing a 19% year-over-year increase in Q3.
Given Amazon's dominance in so many areas where AI will have a significant impact, investing in this stock is a no-brainer at this point.
In the realm of finance and investing, Dell Technologies' impressive growth in the AI server market and potential opportunity from a competitor's missteps have made it an attractive prospect for those looking to invest in AI stocks. With a 9% revenue increase to $25 billion and a 38% surge in revenue for its infrastructure solutions segment, Dell stands to gain significant market share in the high-performance server market.
Meanwhile, Amazon, renowned for its e-commerce business and cloud computing segment, has entered the hardware market for generative AI with the help of Nvidia's GPUs. The company's AI services cater to developers at various levels, and its dominance in areas where AI will impact significantly has made it a potential investment choice for many.
