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On Monday, Citi reaffirmed a Buy rating on Dell Technologies (NYSE:) with a price target of $125.00. This confirmation follows a recent report by the Financial Times on March 25 that China has begun phasing out U.S. microprocessors, particularly those made by Intel and AMD (NASDAQ:). I made it clear that I was doing it.
The Chinese government's new directive is part of a broader push to replace foreign-branded computers with domestically manufactured ones, a campaign that will begin in 2022.
Citi analysts say that according to IDC data, about 5% of China's PC unit share in 2023 will come from government purchases, while the commercial sector (government and businesses) combined will account for about 43% of the total market. He emphasized that he occupied
PC industry majors Dell and HP (NYSE:) derive 5% to 7% of their total PC revenue in China from this sector, which includes both government and corporate sales.
Despite the potential challenges posed by China's new policies, Citi's position on Dell remains unchanged. Analysts believe risks to Dell's business are relatively contained. The company's analysis suggests that the impact on Dell's revenue from China will not materially change the company's overall financial health, given its current market share and the scope of government mandates.
Citi's continued support of Dell's Buy rating demonstrates confidence in the company's ability to navigate the evolving technological and geopolitical landscape. The $125.00 price target suggests that Citi sees Dell stock potentially performing well despite recent developments in China's technology procurement policies.
Investors and market watchers will be watching to see how Dell and other US-based PC makers adjust their strategies in response to changes in China's regulatory environment. For now, Citi's ratings provide a measure of stability in the face of these regulatory changes.
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