US, Chinese Tech Giants Face Profitability Squeeze Amid AI Server Push
Dell Technologies and other server manufacturers are grappling with margin pressures as they race to meet booming demand for AI-optimized hardware. The company's Q2 gross margin slipped to 18.7%, missing estimates, while expedited shipping and aggressive pricing eroded profitability.
Despite raising full-year revenue guidance to $105B-$109B on strong AI server demand, Dell shares fell 5.8% as earnings projections disappointed. The stock remains up 16% YTD, trading at 13.2x forward earnings—a valuation reflecting both AI Optimism and execution risks.
J.P. Morgan analysts note the industry's paradox: while AI infrastructure spending surges, supply chain bottlenecks and cutthroat competition for hyperscaler contracts are compressing margins across the sector.
