Recent developments in the tech industry indicate that a broad-based rebound for semiconductors may not be in the near future, unless it relates to artificial intelligence (AI) applications.
In light of their recent earnings reports, two major tech companies have shared a similar outlook with analysts: while there continues to be strong demand for chips and hardware that enable AI, other market sectors are not faring as well.
Dell Technologies announced mixed financial results for its latest quarter, with a revenue of $22.3 billion, a 10% decrease compared to the previous year and falling short of the Wall Street consensus estimate of $23 billion. Furthermore, the company’s guidance for the fourth quarter is weak, with an expected revenue range of $21.5 billion to $22.5 billion, below the Street estimate of $24 billion.
Jeff Clarke, the Chief Operating Officer of Dell, acknowledged the high demand for AI servers but expressed disappointment in the traditional PC market. According to Clarke, the anticipated rebound in this market has been delayed.
“In Q2, we were optimistic about the increased demand for PCs in June and July,” Clarke noted during the earnings call. “However, things took a turn. The business started to slow down, and this decline continued into September and October.”
As a result, Dell stock dropped 5.3% to $71.89 in midday trading on Friday. Similarly, Intel stock, the largest PC processor manufacturer, dipped 2.2% to $43.72.
Marvell Technology also experienced strong demand in the AI sector but encountered weakness in other areas. The company specializes in selling chips and hardware products for data centers, 5G infrastructure, networking, and storage markets. Marvell provided a revenue guidance range for the current quarter, with the midpoint falling below Wall Street estimates.
“The significant growth from AI and cloud technology is helping us navigate a softening demand environment in other end markets,” stated Matt Murphy, the CEO of Marvell, in the earnings release.
This news impacted Marvell stock, which declined 5.2% to $52.83.
These reports hint that the positive PC industry figures observed in the summer may have been a temporary situation driven largely by retailers replenishing their inventories, rather than sustained market demand. Currently, the only area exhibiting durable growth is AI hardware.
It is evident that the future of semiconductors will rely heavily on their integration with AI applications.