Bloomberg Intelligence Caterpillar Warns Tariff Impact Bigger Than Previously Seen
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Aug 29, 2025 Dell faces rising challenges with declining AI server sales and underwhelming profit margins, stirring investor concern. Caterpillar warns of a hefty $1.8 billion tariff impact this year, signaling more significant risks than anticipated. Meanwhile, the love for AI thrives as NVIDIA's strong revenue continues to captivate investors. On the home front, despite high mortgage rates and limited supply, homebuilder stocks may see potential growth due to stabilizing rates and improved consumer confidence.
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AI Server Growth Doesn't Equal Immediate Profit Surge
- Dell raised AI server guidance to $20B for fiscal 2026, signaling strong demand despite near-term concerns.
- AI server sales can boost revenue growth but not proportionally EPS due to lower gross margins.
AI Servers Are Margin Dilutive Today
- AI servers carry materially lower gross margins (mid-teens) versus traditional servers (20s–30s).
- Heavy AI sales can be earnings-dilutive even as they drive revenue and market share.
Prioritize Enterprise AI Sales Over Hyperscale Discounts
- Shift sales from hyperscale/neocloud deals to enterprise customers to improve gross margins over time.
- Be patient because enterprise adoption and margin recovery will take a few years to materialize.