Investment bank UBS recently warned in a research report that driven by the surge in demand for high-bandwidth memory (HBM) and DRAM in the field of artificial intelligence GPUs, the global memory market continues to tighten, and its prices have risen by more than 400% in some regions. This price increase pressure is expected to be more obviously transmitted to Dell's PC and server business from the second half of this year to the first quarter of 2027.
UBS also significantly raised Dell's stock price target from US$243 to US$440, and raised the company's profit forecast for fiscal years 2027 and 2028, believing that the strong growth of AI servers is enough to offset part of the cost impact caused by the "memory crisis".
UBS's latest coverage comes after Dell reported results for the first quarter of its fiscal year. In the quarter, Dell achieved revenue of US$43.84 billion and earnings per share of US$4.86. Revenue increased by 88% year-on-year. Net profit jumped from US$965 million in the same period last year to US$3.44 billion. Among them, AI server-related business revenue soared 757% year-on-year, becoming the core driving force for overall performance.
In the context of the rapid expansion of AI computing power demand, the tight supply of HBM and DRAM has driven the overall memory price to soar. In order to ensure supply, PC manufacturers have to endure a memory cost increase of up to 110% in the first quarter of 2026, and set off a wave of "rush-type" stocking. Data from market research firm Counterpoint shows that out of concerns about subsequent price increases and expectations of supply disruptions, panic purchasing behavior has not only pushed up memory contract prices, but also pushed up PC shipments this year to a certain extent.
UBS pointed out in the research report that so far, Dell's supply chain has performed "quite skillfully" in dealing with the sharp rise in DRAM and NAND prices. It has temporarily absorbed a considerable part of the cost pressure through negotiation, price locking and product structure adjustments. However, the bank also emphasized that as the effect of price increases is gradually transmitted through the contract cycle and product pricing, the negative impact of rising memory costs on Dell's PC and server business is expected to become increasingly apparent from the second half of 2026 to the first quarter of 2027.
In UBS's view, one of the key variables for Dell's future is gross profit margin performance. The research report pointed out that due to the high proportion of hardware in Dell's business structure, once component costs remain high for a long time and the revenue structure tilts towards high-configuration products such as AI servers, its overall gross profit margin and profit multiple may face periodic pressure. However, UBS also judged that as the slope of memory price increases may slow down after the first quarter of 2027, the risk of prices continuing to rise sharply is expected to be reduced; the bank does not expect memory prices to fall significantly thereafter, so the profit margins of PCs, servers and storage products will still face a higher cost environment in a longer period, rather than a typical cyclical correction of "rising and then falling".
Dell also released a similar signal on its earnings call. When talking about key components such as NAND and DRAM, Jeff Clark, the company's chief operating officer, said that the rapid increase in component costs has forced the company to frequently adjust product pricing to cope with changes. He admitted that the world is currently in an unprecedented inflationary environment. Whether it is fuel, raw materials, or core components such as DRAM, NAND, and CPU, the price fluctuation speed and amplitude are significantly faster than in the past. The company has to maintain higher flexibility and response speed in pricing strategies, and existing signs show that this situation is difficult to change in the short term.
In the report, UBS also cited the views of market analysts on social platforms, saying that DRAM and NAND price pressure will further increase in the next two to three quarters. Affected by this, even if Dell continues to take active measures in supply chain management, its PC and traditional server businesses may still face more severe cost-price balance tests in the next few financial quarters, and the new round of AI-oriented server demand cycle is regarded as an important pivot to support the company's mid- to long-term growth and valuation improvement.