HP and Dell's Weak Forecasts Cause Share Decline, Raising Concerns About PC Market Recovery
Dell and HP shares decline following weak forecasts, casting doubt on PC market recovery. Traditional PC demand weakens post-pandemic boom, while AI-powered computers face slow adoption. Dell's AI server business experiences growth, but concerns arise over Nvidia's next-generation AI chip rollout.
Dell saw a significant drop of 11%, translating to a potential loss of around US$11 billion from its market value of US$99.50 billion, as it projected quarterly revenue below expectations. Similarly, HP's shares fell by approximately 5%, leading to a potential decrease of nearly US$2 billion from its market capitalisation of US$37.68 billion, after its quarterly profit forecast fell short of analysts' predictions.
The traditional demand for PCs has shown signs of weakening post the pandemic boom, while the adoption of AI-powered computers has not yet reached mass levels despite some interest from corporate and educational sectors. Morningstar analyst Eric Compton highlighted, "We have long warned that we did not expect artificial intelligence personal computers to lead to any structural change in demand for PCs, and we think this is perhaps what the market was disappointed with."
The anticipated computer upgrade cycle triggered by Microsoft's shift from Windows 10 to Windows 11 has been slower than initially expected. HP CEO Enrique Lores mentioned, "Since the Windows 11 refresh has ramped slower than previous industry transitions, we expect to see the impact of the upgrade to be more pronounced in 2025." On the other hand, Dell's AI server business has been a bright spot, with revenue in the servers and networking unit surging by 58% due to the demand for servers from cloud companies aiming to leverage AI capabilities.
While some analysts have raised their price targets for Dell and HP, others have lowered them, expressing concerns about the slow rollout of Nvidia's next-generation AI chip, which could potentially impact Dell's sales and profit margins. Analysts at Barclays noted, "The transition to Blackwell could be impacting the time to revenues for Dell. We are concerned that these Blackwell systems will pressure gross margin percentage even further." HP shares are currently trading at 10.84 times analysts' profit estimates, compared to 15.51 for Dell and 30.94 for Microsoft.
Dell and HP shares decline following weak forecasts, casting doubt on PC market recovery.
Traditional PC demand weakens post-pandemic boom, while AI-powered computers face slow adoption.
Dell's AI server business experiences growth, but concerns arise over Nvidia's next-generation AI chip rollout.
Source: REUTERS