Dell has told investors that its supply of AI servers can’t meet demand. The American company sold half a billion dollars worth of these devices last quarter. The culprit: Nvidia, which is unable to get anywhere near enough of its GPUs in the hands of partners.
Dell COO Jeff Clarke said the company has never seen a demand increase as steep as this. Introduced in late 2022, the PowerEdge XE9680 has been in heavy demand. These servers contain a fourth-generation Intel Xeon and have room for eight Nvidia GPUs. Clarke revealed that the backlog of orders for this product doubled worldwide over this past quarter.
Although Dell itself has made every effort to produce these AI servers, according to Clarke, the problem lies with Nvidia. That company simply doesn’t have the capacity through chip manufacturer TSMC to meet demand. The result is a 39-week lead time for customers. For those without a calendar on hand: anyone ordering a Dell AI server right now can, with any luck, receive its server in August 2024.
Alternatives are coming (hopefully)
For this reason, Dell will be yearning for alternatives to Nvidia, which the Dell COO says will appear in 2024. But those still need some work, as the “software stacks need to be taken care of.” Although Clarke does not mention them, we know that Intel and AMD will be the only ones capable of providing viable competition for Nvidia. Clarke is taking a wait-and-see approach with regard to customers being eager to pick up such an alternative.
For their part, Dell’s procurement team faces a field of competitors in its own right: companies such as Microsoft, Google, AWS, OpenAI and Meta will also be salivating over the scarce Nvidia offerings.
Cautious buyers lead to disappointing PC market
The caution of PC consumers can also be seen at Dell. PC sales of $12.3 billion were lower than expected, something Clarke explains as a result of anticipation for innovative options in 2024. The “AI PC” should make its appearance then, with “Intel, AMD and Windows on ARM” examples given by Dell. Either way, the PC market is “ready for a refresh,” he thinks. Obviously, Dell would prefer every year to be a refresh year, but the company is not alone in making this prediction. At HP, they also expect an uptick in demand for AI-capable PCs in 2024.