Morgan Stanley admits short-selling mistakes, JP Morgan aggressively bullish... Dell Technologies, Inc. Class C (DELL.US) delivers explosive "AI report card", sparking a wave of target price upgrades on Wall Street.

When the market was still arguing about the competition of AI big model parameters and the lack of computing power, a traditional hardware company that "sells computers" completely changed the narrative with a "terrifying" quarterly report. Dell Technologies, Inc. Class C's revenue for the first quarter of the 2027 fiscal year soared by 88% to $43.8 billion, net profit more than doubled, AI server revenue skyrocketed by 757% year-on-year, new AI orders reached $24.4 billion, and the backlog of orders broke through the historical record of $51.3 billion. In response to analysts' question of "whether this is real demand or demand prepositioning," Dell Technologies, Inc. Class C's Vice Chairman and Chief Operating Officer Jeff Clarke gave a resounding answer during the conference call: this is not a demand problem, it is a supply problem. Driven by this, as of the time of writing, Dell Technologies, Inc. Class C's stock price skyrocketed by about 35% at the opening on Friday, with a year-to-date cumulative increase of over 150%, and the total market value is expected to surpass $280 billion. Wall Street sentiment has been ignited, with several Wall Street investment banks quickly raising their target prices. Among them, JPMorgan Chase raised its target price from $280 to $500, and previously cautious Morgan Stanley admitted "judgment error" and began to reassess its models and valuation frameworks. "This is not a demand issue": Four major shortages in the supply chain, memory is the most severe Facing analysts' question of "is this real demand or demand released in advance," Dell Technologies, Inc. Class C made a decisive judgment. Clarke emphasized during the conference call that the current core bottleneck is entirely on the supply side. Dell Technologies, Inc. Class C's supply chain faces four major shortages, ranked in severity as: DRAM > NAND > CPU > hard drive, with memory being the biggest bottleneck. "We are almost repricing every day," Clarke said, "Customers also feel this pressure. Unfortunately, considering the environment we are in now, I don't think this situation will change. Whether it's fuel, raw materials, DRAM, NAND or CPU, we are in an unprecedented, rapidly changing inflation environment... and everything we see indicates that this situation will continue." Due to the ongoing supply chain tightness, many large customers have started to actively sign long-term supply agreements for 3 to 5 years to lock in future capacity, which is an extremely rare phenomenon in the history of hardware procurement. Driven by the inflation environment and supply anxiety, customers' tolerance for infrastructure costs has significantly increased, giving Dell Technologies, Inc. Class C stronger bargaining power. Melissa Otto, Director of Research at S&P Global, Inc. Visible Alpha, commented: "With economies of scale, supplier relationships, and the ability to prioritize demand, Dell Technologies, Inc. Class C has gained market share during the shortage period, putting it in a more advantageous position than its competitors." Market insiders pointed out that the sharp rise in Dell Technologies, Inc. Class C's stock price in this round also means that the AI market is shifting from GPU chip manufacturers to server manufacturers, server integrators, and data center infrastructure providers. Previously, the market focus had long been on chip companies such as NVIDIA Corporation and AMD; now, server manufacturers like Dell Technologies, Inc. Class C and Super Micro Computer, Inc. have begun to emerge as key beneficiaries in the AI capital expenditure cycle. Meanwhile, Dell Technologies, Inc. Class C also secured a long-term contract worth $9.7 billion with the U.S. Department of Defense, further strengthening its position as a supplier of enterprise and government-level infrastructure. However, some market participants warned that there are still risks in the AI server business, such as supply chain bottlenecks, limited supply of high-end GPUs, and fluctuations in future demand pace. Some investors in communities such as Reddit pointed out that although AI server revenue is growing rapidly, a large amount of the new revenue still needs to be paid to GPU, HBM, and storage chip suppliers, so it remains to be seen whether the long-term profit margin can continue to expand. But at least from the current market sentiment, it is clear that Wall Street is more willing to believe that the boom in AI infrastructure construction may have just begun. Wall Street rating game: Morgan Stanley admits mistake, Wall Street target prices are all raised After the financial report was released, major Wall Street institutions quickly updated their ratings and target prices, with a clear divergence in opinions on Dell Technologies, Inc. Class C's future performance. JP Morgan: Demand far exceeds expectations, Dell Technologies, Inc. Class C has pricing power JPMorgan Chase maintained an "overweight" rating and raised its target price from $280 to $500. The analyst team led by Samik Chatterjee pointed out that Dell Technologies, Inc. Class C has "once again significantly raised its performance expectations for the 2027 fiscal year, and the demand environment continues to far exceed expectations," raising the full-year AI server revenue guidance from $50 billion to $60 billion. JP Morgan believes that while there are concerns about demand being released in advance, Dell Technologies, Inc. Class C's overall strong order backlog enhances people's confidence in the limited possibility of demand falling this year. It is worth noting that JP Morgan emphasized that Dell Technologies, Inc. Class C is not only experiencing high growth in the AI server field but also a significant recovery in its traditional server and PC business. Analysts believe that this means that Dell Technologies, Inc. Class C is not simply relying on the AI theme speculation but is experiencing "resonant growth across all business lines." More importantly, despite the continuous rise in DRAM and NAND storage chip prices, Dell Technologies, Inc. Class C has successfully maintained its profit margins. JP Morgan pointed out that Dell Technologies, Inc. Class C, due to its economies of scale, supply chain capabilities, and pricing power, continues to pass on upstream cost pressures to customers, which is clearly better than most IT hardware peers. "Based on the latest performance outlook, Dell Technologies, Inc. Class C's non-AI business gross margin growth is even higher than previously expected year-on-year." Analysts said. Chatterjee and his team said: "We do not believe that Dell Technologies, Inc. Class C's updated approximately 50% year-over-year revenue growth expectation is sustainable; however, equipment and infrastructure upgrades, as well as additional capacity demand directly or indirectly related to artificial intelligence, make the sustainable growth rate in the medium term higher than the previously announced long-term growth rate of around 15%, which not only requires a significant increase in valuation multiples but also an upward revision of profit forecasts." Citigroup: Backlog of orders may continue until the end of the year Citigroup maintained a "buy" rating and raised its target price from $290 to $475. Citigroup analysts said, "Dell Technologies, Inc. Class C's stock price has risen by about 35%, driven by significantly better-than-expected performance and raised performance expectations. The first quarter revenue grew by 88% year-on-year, significantly exceeding the upper limit of expectations and Wall Street expectations, and earnings per share also increased significantly due to margin and scale improvements. Performance guidance also significantly exceeded expectations. Demand continues to outstrip supply, which supports the continuity of backlog of orders until the end of the year." Melius' rating upgrade was the most aggressiveraising Dell Technologies, Inc. Class C's target price from $380 to $565, corresponding to a 21 times price-earnings ratio based on its 2029 fiscal year earnings estimate. Melius pointed out that AI server revenue grew by 143% this year, accounting for approximately 36% of total sales. In addition, Bank of America Securities raised its target price to $500 and maintained a buy rating, Piper Sandler raised its target price to $497, Evercore ISI resumed coverage and gave an "outperform" rating with a target price of $450. Morgan Stanley "admits mistake": this is one of the strongest quarters in the hardware industry in recent years Most notably is Morgan Stanley, which had the most conservative stance on Dell Technologies, Inc. Class C. Analyst Erik Woodring's team previously maintained an "underweight" rating but admitted in its report after the financial report was released, "we were wrong this time," and announced that they are reevaluating their models and target price (previously $170). Woodring wrote in the report, "Although component costs are generally rising, Dell Technologies, Inc. Class C has achieved unprecedented strong demand in all business areas, with higher profit margins. This not only reflects strong market demand, especially for infrastructure but also demonstrates Dell Technologies, Inc. Class C's execution and market share growth. We were wrong about this forecast, and we are currently reassessing our models and forecasts." Morgan Stanley pointed out that Dell Technologies, Inc. Class C has achieved above-expected growth in almost all business areas: infrastructure business revenue surged by 181% year-on-year; AI demand continues to far exceed supply; traditional server demand is equally strong; storage business achieved its best growth rate in nearly three years; and full-year profit forecasts were raised by nearly 40%. Analysts said that while there is indeed a certain element of "pre-purchasing" in the current demand, the overall demand environment has significantly strengthened over the past three months. Especially in the background of global enterprises' concerns over the tight supply of GPUs, HBM, and high-end memory, a large number of customers are locking in future infrastructure orders ahead of time. Dell Technologies, Inc. Class C's management also mentioned during the financial report conference call, "The uncertainty of memory supply is driving customers to lock in infrastructure resources for a longer term." This statement further confirms the current AI industry chain is still in a "supply exceeds demand" state.