With AI Boom, Dell's Datacenter Biz Is Finally Bigger Than Its PC Biz

Summary

Every OEM in the world has two choices. Choice One: Sell the Nvidia AI hardware and software stack and boost the top line while diluting operating income in their systems businesses. Choice Two: Get basically no AI revenues at all excepting an AMD deal here and there and, in the case of Hewlett Packard Enterprise and Dell and Lenovo every once in a while, some fairly large system sales to HPC national labs every four years. Get nothing incremental above and beyond traditional server sales to enterprises, governments, and academia, riding the Intel Xeon and AMD Epyc upgrade generational waves. Neither is a great option, but every OEM aside from IBM (which has its very own installed base and a unique and indigenous AI acceleration plan that does not involve either Nvidia or AMD) is smart enough to take Choice One because they need a story to tell and they also have hopes to sell incremental storage, networking, and services into the accounts where they get AI deals. Nvidia knows all of this, which is why it continues to accrue most of the margins in AI cluster sales, as its most recent financial results so clearly show. Michael Dell is multi-billionaire in his own right, and attained that status because he is calm and smart, and importantly, also built the largest traditional datacenter equipment supplier in the world. And that is why Dell has managed to get the company that bears his name at the front of the line building the gear for some of the largest deals that are going down in AI, notably massive clusters at xAI and CoreWeave. It doesn’t hurt, either, that there is a desire to buy American to avoid the wrath of President Trump. Let’s dive into the numbers and see what is happening in the datacenters that Dell serves. In the second quarter of fiscal 2026, which ended on August 1 (the quarter, not the year), Dell had $23.94 billion, up 26.3 percent year on year and up 36 percent sequentially, thanks in large part to some huge AI systems that were installed in the...