By Asmita - Nov 27, 2024
HP and Dell experience stock declines on November 27, 2024, after disappointing forecasts about the PC market recovery. Dell's shares drop by 11%, losing $11 billion in market cap, while HP's fall by 5%, decreasing by nearly $2 billion. Lackluster demand post-pandemic and slow Windows 11 uptake are key factors. Dell sees growth in AI server business, but concerns loom over Nvidia chip delays impacting sales. Analysts have varying views on HP and Dell's future amidst industry challenges and tech transitions.
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Shares of HP and Dell experienced significant declines on November 27, 2024, following the companies' forecasts that raised concerns about the recovery of the personal computer market. Dell's stock plummeted by approximately 11%, resulting in an estimated loss of $11 billion from its market capitalization, which was around $99.5 billion. Similarly, HP's shares fell by about 5%, leading to a decrease of nearly $2 billion from its market value of $37.68 billion. Analysts noted that the anticipated recovery driven by AI-enabled PCs has not materialized as expected, contributing to investor apprehension.
The decline in demand for traditional PCs post-pandemic has been a significant factor in these disappointing forecasts. The expected surge in sales due to Microsoft's transition from Windows 10 to Windows 11 has also been slower than anticipated. HP CEO Enrique Lores indicated that the uptake of Windows 11 is lagging behind previous industry transitions, suggesting that the impact of this upgrade cycle might not be felt until 2025. Analysts, including Morningstar's Eric Compton, have expressed skepticism regarding the potential for AI PCs to drive substantial changes in overall PC demand, further fueling concerns among investors.
Despite these challenges, Dell reported a bright spot in its AI server business, with revenues in its servers and networking unit soaring by 58%. This growth is attributed to increased demand from cloud providers eager to leverage AI technology. However, some analysts cautioned that delays in the rollout of Nvidia's next-generation AI chips could negatively affect Dell's sales and profit margins. The ongoing issues with Nvidia's Blackwell chips and tight semiconductor manufacturing capacities have raised concerns about future revenue generation for both companies.
Market analysts have mixed sentiments regarding the outlook for HP and Dell. While some have raised price targets for both companies, others remain cautious due to the slow adoption of AI technologies and the overall sluggishness in traditional PC sales. Currently, HP shares trade at a lower price-to-earnings ratio compared to Dell and Microsoft, indicating a more cautious investor sentiment towards HP's recovery prospects. The broader PC market continues to face challenges as it navigates a post-pandemic landscape while trying to adapt to emerging technologies.
