📈 Dell's $5B AI Server Surge

Good morning.

⚡ The Fast Five → Capital One and Discover shareholders green light $35B merger, Bill Ackman raises bid for Howard Hughes, Silver Lake nears deal for Intels’ Altera, Shift4 strikes $1.5B deal for Tax-Free Shopping Network, Dell’s $5B deal with xAI boosts value

🔎 Market Trends → S&P 500 ekes out all-time closing high as Fed minutes eyed; US Futures Flat After S&P 500 Hits New Record High

And now…

⏱️ Your 5-minute briefing for Wednesday, February 19, 2025:

MARKET BRIEF
Before the Open

Pre-Market

Fear & Greed

Markets in Review

S&P 500 Hits Record as Investors Await Fed Clues

The S&P 500 closed at a record high, rising 0.2% to 6,129.6, while the Nasdaq added 0.1% to 20,041.3. The Dow was little changed at 44,556.3 as energy stocks led gains, while communication services lagged.

The Big Picture:

Investors are on Fed watch. The central bank’s January meeting minutes are due Wednesday, offering fresh clues on policymakers’ stance after they held rates steady following three straight cuts.

The Fed’s cautious tone remains unchanged. Chair Jerome Powell reaffirmed last week that the economy is strong and policymakers are in no rush to cut rates. Meanwhile, hotter-than-expected inflation data from January suggests the Fed isn’t done fighting price pressures just yet.

The 10-year Treasury yield rose 7.6 basis points to 4.55%, while the 2-year yield climbed 4.7 basis points to 4.31%. Elsewhere, WTI crude oil gained 1.5% to $71.82 per barrel as demand outlooks improved.

Market Movers:

• Intel (INTC) surged 16%, topping the Nasdaq and S&P 500 amid reports that Taiwan Semiconductor (2330) and Broadcom (AVGO) are considering bids for parts of its business. Taiwan Semi dipped 0.6%, while Broadcom lost 1.9%.

• H&E Equipment Services (HEES) soared 15% after receiving a superior buyout offer from Herc (HRI). This throws a wrench into its pending acquisition by United Rentals (URI), which slid 2.8%, while Herc fell 7.3%.

• Medtronic (MDT) dropped 7.3%, the worst S&P 500 performer, after missing revenue estimates due to lower surgical inventory orders.

• Conagra Brands (CAG) lost 5.5% after cutting its fiscal 2025 earnings and sales outlook.

What They’re Saying:

"For now, hopes of further Fed easing are off the table—at least until inflation stabilizes or the labor market shows signs of real cooling," Stifel noted.

WHAT WE’RE WATCHING
Events

• Today: Federal Reserve - FOMC Meeting Minutes - 2:00pm

• Why You Should Care: It's a detailed record of the FOMC's most recent meeting, providing in-depth insights into the economic and financial conditions that influenced their vote on where to set interest rates.

Earnings Reports

• Today: HSBC, Carvana, Garmin, Philips, American Water, Analog Devices, Crown Castle, Texas Pacific Land Corporation, Nutrien

• Tomorrow: Consolidated Edison, CenterPoint Energy, Alibaba Group, Live Nation Entertainment, Walmart, Block, Inc., Booking.com

MARKET BRIEF
Leading News

Dell's AI Server Surge: A $5B xAI Deal Signals Bright Spot

Why it matters:

As the AI gold rush intensifies, Dell (DELL) is positioning itself as the pick-and-shovel supplier for the next computing revolution, with a fresh $5B deal from xAI validating its strategic pivot. The OG PC maker is morphing into an AI infrastructure kingpin.

Zoom Out:

Traditional PC giant Dell is engineering a remarkable transformation, leveraging its decades of enterprise relationships to capture the burgeoning AI server market. While near-term guidance may disappoint Wall Street's ever-impatient analysts, the company's long-term trajectory points toward significant growth.

Like the prudent merchant who supplied miners during the California Gold Rush, Dell is building the infrastructure that powers AI's ambitious dreams. The recent xAI megadeal represents just the tip of the proverbial iceberg.

Key Insights:

• Follow the money: Dell's AI server backlog suggests a multi-year growth runway, despite potential quarter-to-quarter lumpiness. The company's enterprise relationships and supply chain expertise give it structural advantages over newer entrants.

• Component economics: While tariff concerns persist, Dell's scale allows it to navigate supply chain headwinds more effectively than peers like HPE and Supermicro (SMCI). The company's cost control measures and strategic component sourcing provide meaningful margin protection.

• Valuation disconnect: At current levels, Dell trades at a significant discount to its recent highs, suggesting Wall Street may be undervaluing its AI transformation potential.

Market Pulse:

"Don't bet against Michael Dell" — Melius Research's Ben Reitzes, capturing the street's growing recognition of Dell's AI infrastructure opportunity.

Bull’s Take:

Smart investors should look past short-term guidance noise and focus on Dell's emerging position as a crucial AI infrastructure provider. With shares down 36% from peaks, current prices offer an attractive entry point for patient investors seeking exposure to AI's secular growth story.

Headlines

• Bill Ackman raises bid for Howard Hughes, says he will turn it into ‘modern-day Berkshire’ (link)

• Capital One, Discover Shareholders Approve $35 Billion Merger (link)

• Silver Lake nears deal for majority stake in Intel's Altera unit (link)

• U.S. homebuilders raise alarm over tariffs as sentiment falls to 5-month low (link)

• Diamondback Energy to expand in Permian basin with $4.08 billion deal (link)

• Payments Processor Shift4 Strikes $1.5 Billion Deal for Tax-Free Shopping Network (link)

CRYPTO
Fear & Greed

Headlines

• Bitcoin Slumps Below $94K, but One Analyst Says $500K Forecast Remains in Play (link)

• SEC acknowledges spot XRP ETF filing from Bitwise (link)

• Strategy announces $2 billion convertible note offering to fuel future bitcoin purchases (link)

DAILY SHARE
On the Socials