Investors are questioning the returns companies are getting from pumping billions of dollars into artificial intelligence (AI). Doubt and uncertainty are a big part of why many technology and AI-driven stocks have struggled in recent months.
Last week, two technology stocks got a big boost from AI, but in very different ways. Here’s how.
Will AI create the world’s first trillionaire? Our team just published a report on a little-known company, called “Essential Dependency” that provides critical technology to both Nvidia and Intel. Continue »
Block (NYSE: XYZ ) One of the breakout tech stocks was down nearly 23% year-to-date, though it rallied last week. The fintech stock has risen about 24% in the past week, mainly on the strength of its fourth-quarter earnings report, which was released on February 26. The rally stems from a restructuring and cost-cutting plan that management hopes will improve efficiency and boost earnings.
The plan calls for 4,000 layoffs and a workforce reduction of about 40%. The tasks will basically be done by AI. In turn, Block’s guidance called for an 18% increase in gross profit, a 26% increase in operating margin, and a 54% increase in revenues in the current fiscal year.
Here’s a quote from CEO Jack Dorsey in a shareholder letter:
The main article is simple. Intelligence tools have changed the meaning of building and running a company. We are already seeing this internally. A remarkably small team, using the tools we’re building, can do a lot and do it better. And the capabilities of intelligence tools are accelerating every week. I don’t think we are yet to realize that. I think most companies are late.
Welcome to the future.
Analysts at Bernstein estimate the restructuring plan will save $750 million in 2026 and $1 billion annually.
Block received a number of analyst upgrades after earnings and has an average price target of $86.50 per share, suggesting a 30% upside. It’s also a good value, trading at 17 times forward earnings, so it looks like a solid buy.
Dell Technologies (NYSE: DELL) The stock is up about 21% since last week, also fueled by its latest earnings report. The personal computer and server maker had record revenue in Q4, up 39% year over year. Revenues rose 57%, including 45% on an adjusted basis.
The division that sells servers and AI infrastructure for data centers saw revenue rise 40% compared to its PC division, where revenue rose 5%. In particular, Dell’s AI-optimized servers proved to be a major growth engine, as sales increased 342% year over year.
