Dell’s total server shipments are expected to return to significant growth of about 15% YoY in 2024 thanks to strong AI server demand, well above the industry average of 3–5% YoY

1. My latest supply chain check indicates that the higher-than-expected demand for AI servers has prompted Dell to request a significant production expansion of about 200% for AI server bottleneck components, such as chassis and motherboard SMT, to meet the future needs of enterprise customers. The increase in AI server shipments will also benefit conventional server demand, with Dell expecting total server shipments to rebound to 15% YoY growth in 2024 (vs. an about 10% YoY decline in 2023).
2. Critical considerations for enterprise customers to build AI servers instead of fully utilizing cloud AI hosting include ease of management, data security, and customization requirements to integrate with the company’s existing IT infrastructures.
3. The reasons why Dell can obtain better-than-expected AI server orders in the enterprise market include launching PowerEdge servers with Nvidia AI chips ahead of competitors and its collaboration with Meta to help enterprise customers deploy Llama 2 AI models locally.
4. The deployment of AI servers benefits conventional server demand primarily because conventional servers need to upgrade to run AI applications, and AI servers can increase the utilization of conventional servers.
5. Due to AI chip supply constraints, Dell’s 2023 AI server shipments will be 10,000 to 15,000 units or less. However, shipments will increase significantly to 25,000 to 30,000 units or more in 2024. With the momentum of AI servers, Dell’s conventional server shipments will also grow. Therefore, Dell currently expects total server shipments to resume growth to 15% YoY in 2024 (vs. a decline of about 10% YoY in 2023).