Dell, HPE Named Top AI Server Plays As Analyst Cites $14B Backlog

BofA Securities analyst Wamsi Mohan observed that from 2006 to 2024, server market revenues grew at a 9% compound annual rate, while unit volumes rose by 4% annually. Looking ahead, he expects artificial intelligence to drive most of the revenue growth in the server market over the next six years.

Mohan projected server market revenues to grow at a 25% annual rate between 2024 and 2030, with unit shipments increasing at a 7% annual pace.

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Mohan identified Dell Technologies (NYSE:DELL) and Hewlett-Packard Enterprise Co (NYSE:HPE) as key beneficiaries of rising AI server demand. He also noted that Seagate Technology Holdings (NASDAQ:STX), Western Digital Corp (NASDAQ:WDC), NetApp (NASDAQ:NTAP), and Pure Storage (NYSE:PSTG) could benefit over the long term as AI workloads boost demand for storage solutions.

Mohan projected that AI server revenues will outpace overall server market growth between 2024 and 2030, rising at a 28% CAGR compared to the broader market’s 25% CAGR. He estimated that non-AI server revenues will grow more slowly, at about 4% annually.

Mohan also expects AI server unit shipments to increase at a 15% CAGR, while total server units grow at a 7.2% annual rate during the same period. He forecasted double-digit revenue growth for training and inference systems within AI servers, predicting 20% CAGR for training servers and a significantly faster 47% CAGR for inference servers through 2030.

Dell: He identified Dell as a key beneficiary of growing AI server demand, particularly as enterprises expand their use of AI for inferencing. Mohan noted that Dell ended the first quarter of fiscal 2026 with an AI server backlog of $14.4 billion, having recognized $1.8 billion in revenue and booked $12.1 billion in new orders during the quarter.

Mohan projected Dell’s AI server revenue could rise from an estimated $9.8 billion in 2024 to over $17 billion in 2025, surpass $30 billion in 2026, and exceed $44 billion in 2027.

Hewlett Packard Enterprise: Mohan also identified Hewlett Packard Enterprise as a significant beneficiary of rising AI demand, estimating its AI server revenue could grow from $4.5 billion in 2024 to $10 billion in 2025, $15 billion in 2026 and $20 billion by 2027. He noted Hewlett Packard Enterprise ended the second quarter of fiscal 2025 with an APU backlog of $3.2 billion, slightly above the $3.1 billion reported at the end of the first quarter.

What’s Next: Mohan pointed out that newer GPUs, such as Nvidia’s Blackwell, require significant power, prompting server and rack manufacturers to integrate liquid cooling systems into their designs. While this specialized hardware currently commands premium pricing, he expects increased competition will eventually push prices down and squeeze margins.

Due to intensifying competition in the AI server market, Mohan expects profit margins to remain under pressure. With GPUs making up a large portion of the cost, he sees operating margins staying in the low-to-mid single digits in the near term.

Mohan projected server industry revenues to grow at a 25% CAGR from 2024 to 2027, primarily fueled by the expansion of AI servers, which command significantly higher average selling prices (ASPs) than general-purpose servers. He forecasted overall server unit growth at 7% CAGR, with ASPs rising at a 16% CAGR during the same period.

Mohan expects most early AI-related demand to center on mid-range and high-end training servers, while inference server demand will rise in later years, primarily in the mid-range segment.

Mohan predicted volume servers, typically priced below $10,000 and used in non-AI applications, will grow at a mid-single-digit pace (5% CAGR over six years). In contrast, Mohan expects mid-range server units to grow at a 19% CAGR, driven by training and inference demand, while high-end server units will grow even faster at a 39% CAGR, fueled by the need to train AI models.

DELL, HPE Price Actions: At publication on Wednesday, Dell stock was up 1.60% at $126.45, Hewlett Packard Enterprise is flat at $20.82.

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