HPE shares soar 30% as demand for AI infrastructure powers stellar quarter

Hewlett Packard Enterprise shares surged 30% on ​Tuesday after a rosy quarter that ​put it on track to hit ‌long-term ​financial targets two years ahead of schedule, the latest evidence of strong demand for its AI servers used in data centers. The ‌premarket gains, if sustained, would add over $14 billion to the company's market value of $62.36 billion.

Hewlett Packard Enterprise shares surged 30% on ​Tuesday after a rosy quarter that ​put it on track to hit ‌long-term ​financial targets two years ahead of schedule, the latest evidence of strong demand for its AI servers used in data centers.

The ‌premarket gains, if sustained, would add over $14 billion to the company's market value of $62.36 billion. They follow strong forecasts from rivals Dell and Super Micro Computer as Big Tech presses ahead with ‌around $700 billion in AI spending this year. The insatiable demand from the AI industry has ‌allowed server makers to pass on higher costs for supply-constrained memory chips to customers, shielding their margins. The firms said strong supplier ties are also helping them navigate the shortage.

"The year of refresh" for enterprise IT equipment, ⁠AI modernization ​and product updates is ⁠also benefiting the companies, Piper Sandler analysts said in a client note. "While HPE is seeing this tidal wave, ⁠we prefer to be in 'other boats' given exposures," Piper Sandler said. Dell shares were up 2.5% ​before the bell, while those of Super Micro rose 4.7%.

At least 12 brokerages raised ⁠their price targets on HPE's stock, giving it a median price target of $65, according to data compiled by LSEG. ⁠That ​is up from $26.50 before the report. "The biggest takeaway from the quarter was that HPE is benefiting from the same pricing dynamic that has recently driven upside at Dell - ⁠customers are absorbing materially higher server prices with little evidence of demand destruction," Morgan Stanley analysts ⁠said.

HPE has a ⁠12-month forward price-to-earnings ratio of 15.66, compared with Dell's 23.92 and Super Micro's 14.49. Shares of HPE have nearly doubled this year.