Dell’s Monster Quarter: A Wake-Up Call for Micron Investors

Dell Technologies’ recent earnings report has sent shockwaves through the tech industry, with record-breaking fiscal second-quarter revenue and a raised forecast sending investors scrambling to understand its implications. Amidst the fanfare about high-bandwidth memory (HBM) and AI spending, another story is brewing: Micron Technology.

The company’s success is not just a testament to Dell’s own prowess but also a validation of Micron’s growth trajectory. Dell’s record-breaking revenue was driven largely by sales of its PowerEdge servers and storage infrastructure, which has significant implications for Micron investors. The demand for DDR5 memory and NAND SSDs from Dell is expected to remain strong, making up the majority of Micron’s business.

Dell booked $60.9 billion in AI-server orders and generated $16.4 billion in AI-server revenue during its fiscal second quarter, ending with a $95 billion backlog. While HBM is an exciting opportunity for Micron, it is not the only story here. The data center requires enormous amounts of memory and storage to support its operations, not just faster chips.

Micron’s own results tell a similar tale: DRAM accounted for 76% of revenue in its fiscal Q3, while NAND contributed 24%. Pricing was the real driver, with DRAM average selling prices jumping in the low-60% range sequentially and NAND prices surging in the mid-80% range. This is evidence of a supply-constrained market, not just a unit-growth story.

Dell and Micron have a symbiotic relationship: as Dell sells more servers and storage, it creates demand for the components Micron supplies. With its PowerEdge servers flying off the shelves and customers buying more memory and storage, that demand remains exceptionally strong.

While some may focus on HBM as the next big opportunity, it’s essential to keep things in perspective. Although every AI rack needs HBM attached to its accelerators, most is allocated by Nvidia, and SK Hynix is still the primary HBM supplier to Nvidia. It’s all the conventional DRAM in the servers and NAND storage behind them that is ultimately more important to Micron’s long-term thesis.

However, there is a risk investors can’t ignore: memory remains a cyclical industry dominated by a few major players, including Samsung, SK Hynix, and Micron. Today’s extraordinary pricing won’t last forever. Micron is already guiding $50 billion of fiscal Q4 revenue, with an estimated non-GAAP gross margin of about 86%. A meaningful increase in memory supply could eventually pressure those margins.

Dell’s monster quarter is a wake-up call for Micron investors: the demand supporting prices isn’t going away yet. In fact, it’s only expected to continue growing. For MU stock shareholders, that’s arguably the more important signal. As they consider their investment strategy, they’d do well to keep in mind the broader memory cycle and the role Micron plays within it.

The stakes are high for Micron investors, but one thing is clear: Dell’s monster quarter has just validated the thesis of a company that’s been quietly building momentum behind the scenes. As the data center continues to gobble up more memory and storage, Micron is poised to reap the rewards. It’s time for investors to take notice.