Martin Gamble on US markets: Dell surges, Costco and Salesforce stagnate

The foreshortened trading week due to the Memorial Day holiday didn’t stop US stock markets grinding out new highs this week led by the technology-led Nasdaq Composite which is up close to 10% over the last month.

Newly appointed Federal Reserve chair Kevin Warsh was given a sliver of good news after April’s core PCE (personal consumption expenditures) index rose 0.2% compared with 0.3% expected, and 3.3% for the year, in line with forecasts.

Memory chip maker Micron Technology jumped 19% after UBS tripled its share price target to $1,650 from $535, citing strong AI demand and long-term supply deals.  

The share price rise pushed the chipmaker’s market value above $1 trillion, becoming the 13th US stock to reach the trillion-dollar milestone.

Electronics retailer Best Buy saw its shares rise 15% in extended trading on 28 May after the company forecast second quarter sales above estimates amid demand for laptops and smartphones.

Dell Technologies surges on AI demand

Dell shares surged as much as 40% in after-hours trading after the company revealed a large first quarter earnings beat and significantly boosted its projections for annual revenues and profits on strong AI server demand.

Dell raised annual revenue guidance for its AI server business to $60 billion, up from $50 billion previously.

The computer and server maker now sees fiscal 2027 revenues in a range of $165 billion to $169 billion, implying 47% growth with adjusted earnings per share of $17.9, breezing past the average analysts’ estimate of $13.09.

Dell is managing the surge in memory chips prices by passing on the costs and adjusting its supply chain.  

Chief operating officer Jeff Clarke commented: “We're repricing, it feels like, every day.  

“And I'm sure our customers feel that pain. Unfortunately, I don't see that changing given the world that we're living in today where you have an inflationary environment.”

The US Department of Defence awarded Dell a five-year contract worth $9.7 billion to manage licenses for Microsoft 365.

Costco shares subdued despite latest earnings beat

A near record high share price is a factor behind the subdued reaction to Costco’s stronger-than-anticipated quarterly numbers.

The bulk savings retailer reported third-quarter revenue of $70.5 billion, up 11.6% year-on-year, and ahead of the $69.8 billion forecast by analysts.  

While earnings per share hit $4.93, compared with the $4.91 which had been pencilled in and the $4.29 posted for the same period a year ago. One area of slight concern was some modest compression in gross margin thanks to higher fresh food costs.

Costco sells goods as close to their wholesale cost as possible as a way of driving sales and makes the bulk of its returns on subscription fees. If renewal rates were to slump, it would hit the revenue and earnings visibility for which Costco has become so prized.

For this reason, there will be relief that renewal rates came in at 92.2% in the US and Canada and 89.7% worldwide despite recent fee increases. Management struck a confident note as they outlined plans for 30-plus new warehouse openings annually.

Salesforce AI disruption concerns take shine off record quarter

A record first quarter and handsome earnings beat failed to resuscitate Salesforce shares, which remain down by around a third in 2026.

The company doesn’t seem able to shake-off investor anxiety about the potential for AI to reduce demand for its software-as-a-service customer relationship management applications.

Chair and CEO Marc Benioff remains convinced AI is having a positive impact on the business. “Agentic AI is the biggest growth opportunity for our customers, and for Salesforce,” enthused Benioff.

“With more than $1 billion in Agentforce ARR (annual recuring revenues), $3.4 billion in combined AI and data ARR, and 3.8 billion Agentic Work Units delivered for our customers, Salesforce has never been more essential,” added Benioff.

A tepid outlook added to investor concerns after Salesforce projected second quarter revenues in a range of $11.27 billion to £11.35 which landed slightly below the average consensus analysts’ estimate of $11.36 billion.

Barclays analysts downgraded the stock after Salesforce announced a $25 billion debt issuance to finance a share buyback, putting the company into a net debt position.