Apple (NASDAQ:AAPL), Dell Technologies (NYSE:DELL) and HP Enterprise (NYSE:HPE) were among the IT companies in focus on Tuesday, as investment firm Bernstein said artificial intelligence should provide long-term benefits to the sector.
“Although near-term concerns of an AI-bubble persist, we see significant upside in the long-term for IT hardware,” analysts at the firm wrote. “While there is a huge range of outcomes, we land at $1.3T for enterprise inference in the 2030 base case (67% 25-30E CAGR). We see model improvement as the key leading indicator, and caution hyperscale capex may be a lagging indicator. In addition to being positive on the long-term outlook, we believe the early-signs look healthy in the near-term, and net out positive on the theme.”
For Apple specifically, the firm said the iPhone maker as the “gateway to the Intelligence Revolution.” It believes the Tim Cook-led company is the best positioned in the sector and has the most to gain, but it also has the most at risk if it executes poorly.
Dell is also likely to be a long-term beneficiary from AI, as AI servers should drive “significant” earnings and free cash flow growth. However, the firm is less positive on HP Enterprise and Super Micro Computer (SMCI), as it sees “execution challenges and valuation concerns” for the pair. The firm also noted that while HP (HPQ) is inexpensive, it too has “structurally challenged end markets.”
The firm also noted there has been a surge in data as the result of AI, with Seagate (STX) and Sandisk (SNDK) seen as best positioned to benefit.
“Storage in datacenters we expect to continue at 23% CAGR through to 2030 with both HDD and NAND makers poised to benefit,” analysts at the firm wrote. “In [hard-disk drives] the cozy oligopoly should enable robust profit and FCF growth, with Seagate as the leader in HAMR tech best positioned. In NAND, Sandisk should reap significant growth with the return of the New Memory Paradigm.”
The firm has a Neutral rating on Western Digital (WDC), citing headwinds from the Heat-Assisted Magnetic Recording transition.
Lastly, the firm weighed in on the quantum computing revolution and said that IBM (IBM) could wind up being the leader. “Despite being perceived as a declining legacy player, IBM’s investment in innovation is yielding dividends – returning the business to growth,” analysts at the firm wrote in the note.