Watch for a divestiture of a hardware segment (low-end Power, Storage probably lead the odds) coming very soon. . .
https://www.barrons.com/articles/computer-server-demand-ai-dell-hewlett-packard-enterprise-fc5a0d1b
The demand for traditional computer servers is deteriorating as technology buyers keep shifting budget dollars into artificial intelligence projects.
On Monday, Susquehanna analyst Mehdi Hosseini said he expects PC server shipments to disappoint in the September quarter.
“Recent checks suggest a slower recovery in the Server shipment,” he wrote. “Yes, Generative AI is certainly having a hollowing effect. But, we are also hearing of a weaker utilization of traditional Servers.”
Hosseini said third-quarter server shipments are tracking up 3% quarter over quarter, which is “much slower” than prior expectations of up 10% quarter over quarter.
Traditional servers are now projected to be down 20% year over year in the quarter, and AI servers are estimated to be up 23% year over year, according to the analyst.
Dell Technologies [DELL –0.14% (ticker: DELL)] and Hewlett Packard Enterprise [HPE 0.00% (HPE)] are two of the largest sellers of servers worldwide.
Susquehanna’s numbers are the latest evidence that rising interest in AI may be cannibalizing spending from other buckets.
Prominent chip executives and Wall Street firms have been saying customers are feverishly prioritizing AI projects.
Last month, Taiwan Semiconductor Manufacturing [2330 –0.92%] Chairman Mark Liu said the chip manufacturer saw signs that AI-related demand was taking sales away from traditional server chips.
A week before Liu’s remarks, Piper Sandler released a survey of corporate technology buyers that showed generative AI had risen nine spots to become the top emerging technology trend for the next three years, with 75% of CIOs either testing or implementing projects.
Piper’s analysts also predicted server makers would be most at risk of facing additional budget pressures later this year. Their prediction looks to be coming true.