Dell Technologies' (DELL -1.09%) stock price has soared 80% so far in 2024. Recently, Michael Dell, the firm's founder and CEO, announced his plans to sell 10 million shares of Dell Technologies stock, worth around $1.3 billion. The sale was to take place around June 6.
When an executive, especially the founder and CEO, sells so many shares, investors might wonder if they should do the same.
Why is Michael Dell selling Dell stock?
Ten million shares sounds like a lot, but looking at Mr. Dell's overall position shows that this sale represents a small percentage of his holdings. At the beginning of 2024, he owned 345 million shares of Dell, so the sale would represent less than 3% of his position.
Investors may view executives who sell stock in their own firm as bearish. However, it can also be simply a way for the executive to diversify their portfolio, and we don't know why Mr. Dell sold shares. After the sale, he will still own about 47% of the firm's equity. The size of this investment shows he still believes in the firm.
The company's recent financial results and reasons for optimism
Dell's business has two segments: the infrastructure solutions group (ISG) and the client solutions group (CSG). The infrastructure group sells hardware and services that support data centers and other IT infrastructure.
This segment has been the primary driver of growth recently through its sale of artifiical-intelligence-optimized servers. Dell's shipments of these servers are up 100% over the last year. A 42% increase in overall ISG revenue over the last year has been the primary driver of Dell's soaring stock price.
The client solutions group focuses on hardware used by individuals. This includes desktop computers, laptops, monitors, keyboards, and technical support services.
This segment hasn't fared as well. Since last year, growth in the CSG segment has been flat. This is a concern because the segment still makes up 50% of the firm's operating income. Dell can't simply rely on growth in the ISG segment if it hopes to thrive. The client solutions segment must hold up its end of the bargain. Luckily, there may be help on the way.
How will Dell grow its lagging CSG segment?
Big tech companies want Dell's AI-optimized solutions for their data centers and IT infrastructure. Small and mid-sized businesses, as well as consumers, will find their own ways to join the AI revolution. One way will be through adopting AI-capable personal computers.
Over the coming years, experts predict that there will be a "refresh cycle" in personal computers involving a wide adoption of new, superior technologies. A good example of something similar was in the late 2000s when smartphones with touchscreens replaced older cellphones.
The same kind of switch to AI-capable PCs is in the works and massive growth is predicted over the coming years. Currently, AI-capable PCs account for 18% of global PC shipments. Analysts expect AI-capable PC shipments to grow by 44% annually from 2024 to 2028. In four years, these devices could control 70% of the PC market with over 200 million units sold in 2028.
This explosion in the AI-capable PC market would come at a fantastic time for Dell's struggling segment. Dell is already on top of this trend. It has recently announced that new AI-capable PCs will be available in the second half of 2024.
However, the growth in these devices will eat into sales of Dell's traditional PCs. The firm will have to gauge demand for AI PCs versus traditional ones and manage production accordingly. This will ensure the move to the new technology is a net gain. Dell's long history as an industry leader means it is well-positioned to navigate this changing landscape.
Meanwhile, Dell's infrastructure solutions group should keep driving growth until AI-capable PCs take off. Then, both segments of the business should deliver solid growth, giving investors confidence in the future of Dell Technologies.
