Lenovo shares near all-time high after strong AI growth

[HONG KONG] Lenovo Group shares were on track to close at their highest on Friday (May 22) after the company reported strong growth in AI-related earnings that offset difficulties from rising component prices.

The world’s leading PC maker’s shares gained as much as 17 per cent in Hong Kong, extending its run as the best performer on the Hang Seng China Enterprises Index this year. While grappling with a persistent memory shortage, Lenovo has managed to nurture a new growth pillar in its data centre and storage business to cater to explosive AI demand. That helped ameliorate challenges facing its traditional PC business.

For the fiscal year ended March, Lenovo reported profit jumped 38 per cent while it grew revenue by 20 per cent, beating analyst estimates with surprisingly robust numbers. Lenovo appears to be doing a better job than the likes of console maker Nintendo in controlling the impact of higher memory prices, as it maintained its gross margin in the March quarter and grew sales by 27 per cent, its fastest pace in five years.

Lenovo’s artificial intelligence products and services were key to its strong performance. AI-related revenue accounted for 38 per cent of the company’s overall sales last quarter, growing at a 84 per cent rate, according to its statement on Friday.

“Our hybrid AI vision puts us at the forefront of AI inferencing and AI democratisation, so I’m fully confident that we will achieve our goal to become a US$100 billion company in two years.” chief executive officer Yang Yuanqing said in an interview after the earnings.

Underpinning the strong growth is the AI shift from training to inferencing, Yang said. “Inferencing demand will grow even faster and even stronger,” he added. Lenovo is set to start delivery of Nvidia’s Rubin-based platforms in the second half this year and the company now boasts an AI server pipeline worth US$21 billion.

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With its shares up more than 60 per cent this year, Lenovo has joined the global rally in chipmakers, cloud data centre operators and AI model developers seen as the winners of the new technology boom. Its latest quarterly results are encouraging, particularly the improved performance of its AI infrastructure business, according to Bloomberg Intelligence analyst Steven Tseng.

“Lenovo never stood out as a top candidate under the theme of AI,” Tseng said. “But it’s been undervalued for some time and AI is indeed a positive value driver for the company.”

Lenovo’s share gains buck the trend of other Hong Kong-listed tech companies, where Internet platforms face intense competition and profitability pressure from the need for heavy spending on AI hardware and infrastructure. The Hang Seng Tech Index has fallen about 12 per cent this year. BLOOMBERG