Dell Technologies (DELL +2.75%) surged roughly 8.4% on Friday before falling back, finishing the day up 2.2%.
The stock jumped initially after news broke that rival Super Micro Computer's co-founder was arrested on federal charges. It retreated from its high later in the day's trading, unable to escape the larger market slide. The S&P 500 fell 1.6%, and the Nasdaq Composite lost 2.1%.
NYSE: DELL
Key Data Points
Super Micro's legal crisis is Dell's gain
The U.S. Attorney's Office for the Southern District of New York charged Super Micro co-founder Yih-Shyan "Wally" Liaw and two associates with allegedly smuggling $2.5 billion worth of its AI servers to China in violation of U.S. export controls. Liaw was taken into custody on Thursday. SMCI shares cratered 33.3% on the news.
Dell's fastest-growing business segment competes directly with Super Micro -- both build AI servers filled with Nvidia chips -- and the allegations will likely prompt Super Micro customers to look elsewhere.
Image source: Getty Images.
The fundamentals back it up
Dell's AI server revenue hit $9 billion last quarter, up 342% year over year, and the company has a backlog in the dozens of billions.
If the macroeconomic picture looked differently, I might feel otherwise, but I don't think this is the time to be making new investments in AI-related stocks. Valuations are stretched, and a recession could be very painful for the sector.
