Michael Dell on the 3,000-Pound Liquid-Cooled Racks Powering AI Data Centers — Transcript

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1. 0:00Elon is probably the most demanding
2. 0:02customer. No, he's definitely He's
3. 0:03definitely the most demanding customer
4. 0:05there there is.
5. 0:06>> Dell is best known as the king of
6. 0:07direct-to-consumer PCs in the '90s and
7. 0:10early 2000s.
8. 0:11>> Dude, you're getting a Dell.
9. 0:13>> The computer giant is now one of the
10. 0:14most important manufacturers of the
11. 0:16infrastructure behind the AI boom.
12. 0:19>> Dell entered the server business in
13. 0:211989.
14. 0:22>> Wow.
15. 0:23>> When I was 24 years old. So, we've been
16. 0:25at it It didn't actually work the first
17. 0:27time. Okay, it didn't It started working
18. 0:29around the mid-'90s. You know, of course
19. 0:31we got into storage shortly thereafter.
20. 0:34Then we acquired EMC. And so, we've
21. 0:37actually been in this business a long
22. 0:38time and we are number one at it, right?
23. 0:41And so,
24. 0:42>> You You mean by
25. 0:44like revenues, by volume?
26. 0:46>> Exactly. And so, it shouldn't be too
27. 0:47surprising that we're also number one in
28. 0:50AI infrastructure.
29. 0:51>> Dell did half of the servers in the
30. 0:54Colossus one AI supercomputer for
31. 0:57SpaceX. And you did it really fast,
32. 0:59right? I think that was a record-fast
33. 1:01build. It was like 6 weeks or something.
34. 1:03>> Elon is probably the most demanding
35. 1:05customer. No, he's definitely [laughter]
36. 1:06He's definitely the most demanding
37. 1:07customer there there is.
38. 1:09>> Yeah. Was he like Was it Was there a
39. 1:11bonus involved? Get this done in 6 weeks
40. 1:13and
41. 1:14>> I don't know if there was a bonus
42. 1:15involved, but they have
43. 1:18rewarded us with additional business
44. 1:20because we've done a great job and
45. 1:22that's pretty much the pattern.
46. 1:24>> Dell has about 40% of the market for
47. 1:26sales of powerful servers to companies
48. 1:27in North America, but it also has stiff
49. 1:30competition from number two Supermicro
50. 1:32as well as HPE and Lenovo. And AI
51. 1:36hyperscalers like Meta, Microsoft,
52. 1:38Amazon, and Google design and build many
53. 1:40of their own servers.
54. 1:42>> A substantial portion of your business
55. 1:44remains sales to I mean, companies like
56. 1:47Dow Jones, where we are, right? Like We
57. 1:49walked We toured the newsroom. You saw
58. 1:50the Dell monitors, [laughter] the the
59. 1:52Dell PCs, all the rest. That is still
60. 1:54tens of billions in revenue for you
61. 1:56every year. But the the growth driver is
62. 2:00like to me this very peculiar almost
63. 2:02alien object which is the I call it the
64. 2:04AI supercomputer. 6 ft tall, it's 2 ft
65. 2:08wide, it's 3 ft deep, but it weighs
66. 2:093,000 lb and it draws as much power as a
67. 2:14hundred typical US households or maybe
68. 2:16two or three hundred if it's like a
69. 2:18really high-end. And this is the brains
70. 2:21of these new AI data centers.
71. 2:23>> These systems are incredibly
72. 2:24complicated. It's not just a rack with a
73. 2:27bunch of chips in it, right?
74. 2:29>> No, it's full of plumbing now.
75. 2:31>> Well, it's you know, literal plumbing.
76. 2:32Millions of miles of fiber optic cable
77. 2:36and engineering the liquid cooling to be
78. 2:40super power efficient, the storage, the
79. 2:42networking, the deployment,
80. 2:45you know, teams that come in and make
81. 2:47these things all work and then keep them
82. 2:48running all the time.
83. 2:50>> Right. Because each one of these boxes
84. 2:51is like six figures.
85. 2:54>> They're they're they're pretty
86. 2:55expensive, right? And and and uh we we
87. 2:58have learned a lot about how to quickly
88. 3:01deploy these because we have this
89. 3:04demand.
90. 3:05>> Let's talk about lessons from your
91. 3:07[clears throat] big like neo cloud like
92. 3:09hyper scalar customers, you know, the
93. 3:11the folks that are standing up these
94. 3:12these big data centers that we read
95. 3:13often about in the news. You're
96. 3:15transferring these lessons now because
97. 3:17companies are coming to you and saying
98. 3:19we want our own AI which means we have
99. 3:22to have our own AI infrastructure,
100. 3:24right?
101. 3:24>> Companies want control of their data,
102. 3:27their their economics, their kind of
103. 3:30privacy, their security. So, let's say
104. 3:32you have a hundred factories. You're a
105. 3:34manufacturer.
106. 3:36You actually want to have the AI inside
107. 3:39each factory, right? Doing inference to
108. 3:41help you be very effective. And so, yes,
109. 3:44we're we're building these out. It took
110. 3:46us eight quarters to have 3,200
111. 3:49customers building these Dell AI
112. 3:51factories.
113. 3:52And in the last three quarters we've
114. 3:54added 3,300 customers. So,
115. 3:56>> So, it's doubled. It's it's more than
116. 3:57doubled 6,500.
117. 3:59>> And what's also interesting is when you
118. 4:01look inside these companies and actually
119. 4:03what they're doing with the
120. 4:06with their data. They're just kind of at
121. 4:08the beginning of figuring out how to do
122. 4:10this.
123. 4:11>> You're one of the few CEOs who was also
124. 4:15a CEO of well, the same company
125. 4:17obviously during the dot-com bubble.
126. 4:20We're in the middle of an infrastructure
127. 4:22buildout that according to economic
128. 4:24historians is bigger than any in
129. 4:26history. Like as a percentage of GDP
130. 4:28it's bigger than the railroad boom. Do
131. 4:30you have any concerns about
132. 4:32overcapacity? You know, having seen a
133. 4:34lot of these waves over the last 42
134. 4:37years, we take a pretty measured view of
135. 4:40this.
136. 4:41And we think about the risks and the
137. 4:44challenges and how we balance all that.
138. 4:46You know, having seen the the dot-com
139. 4:50period
140. 4:51>> Which Dell survived, not just intact but
141. 4:53pretty well.
142. 4:54>> Sure. And and and you know, our plan is
143. 4:56to survive this as well and and to come
144. 4:58out stronger
145. 4:59>> Are there similar strategies? I mean
146. 5:01Dell famously you've always kept
147. 5:02inventories low, you were building on
148. 5:03demand. Are you still doing that?
149. 5:05>> Sure. I mean we we're we're doing it to
150. 5:07the best we can, right? There are some
151. 5:09new challenges that this presents.
152. 5:12But if you look at our cash conversion
153. 5:14cycle, it's still negative and we, you
154. 5:16know, have an incredible focus on a lot
155. 5:19of the fundamentals.
156. 5:21>> Well, let's talk about those challenges.
157. 5:22I think on earnings calls some of the
158. 5:24other executives at Dell have said, you
159. 5:26know, our number one challenge is DRAM
160. 5:28DRAM DRAM. is memory, memory chips.
161. 5:31>> Right.
162. 5:31>> And of course this is a problem that
163. 5:33everybody has. Like if you're trying to
164. 5:34buy a laptop, this is a problem.
165. 5:36If you're trying to buy a PlayStation,
166. 5:38this is a problem. If you're trying to
167. 5:39buy phones, the price of those are going
168. 5:40up.
169. 5:41>> Cars, right? Because they need memory.
170. 5:43Do you see that bottleneck easing at
171. 5:45all?
172. 5:45>> I think it's going to get worse in 2027
173. 5:48based on what I see right now.
174. 5:49>> crunch.
175. 5:50>> Yes. And and the reason is that it takes
176. 5:54about 4 years to build a new memory
177. 5:56factory. There are a number of them
178. 5:58under construction. You know, Micron for
179. 6:00example, we're a big Micron customer.
180. 6:02>> Right. Like they've pledged $30 billion
181. 6:03dollars a
182. 6:05construction here in the US.
183. 6:06>> Exactly. And And those factories will
184. 6:09start producing in 2029.
185. 6:12Okay.
186. 6:12>> And who knows where [laughter]
187. 6:13everything else will be then.
188. 6:14>> And so, maybe maybe 2029 everything will
189. 6:17be fine, right?
190. 6:19What I see is the way people are using
191. 6:23this technology now is very different
192. 6:25than it was even a year or two ago.
193. 6:27>> With AI, you mean?
194. 6:28>> With agents. Yes, exactly. And so, the
195. 6:32demand is growing faster than supply. It
196. 6:35takes 4 years to build these factories,
197. 6:38so I don't think that the shortage is
198. 6:41going to quickly resolve itself.