Software cracks while Dell's AI backlog hits $95 billion

Dell booked a record $60.9 billion in AI server orders and raised its full-year revenue outlook by $25 billion — and the software complex fell 5% to 7% the same afternoon. What is being repriced this week is not artificial intelligence; it is the cost of money.

The split inside the AI trade

Dell reported after Tuesday’s close: revenue of $47 billion, up 58% year over year, adjusted earnings of $7.04 a share, and $16.4 billion of AI-optimized server revenue against a Street forecast near $16.07 billion. It booked a record $60.9 billion in AI server orders and exited the quarter with a $95 billion backlog, then lifted fiscal 2027 guidance by $25 billion to $192 billion in revenue and $25.50 in adjusted earnings per share, up from a prior $167 billion and $17.90. The stock traded up as much as 10% after hours.

That is the strongest single datapoint on AI demand this earnings season. It landed on an afternoon when the high-multiple software names were being sold hard.

CrowdStrike (CRWD) closed at $215.07, down 6.9% from Monday’s $231 — giving back the record high it set the day before at its own user conference. Cloudflare (NET) lost 6.4%, Datadog (DDOG) 5.6%, Palo Alto Networks (PANW) 5.2%, Oracle (ORCL) 5.2%, Shopify (SHOP) 5.1%, Block (SQ) 5.1%, MongoDB (MDB) 4.2% and Snowflake (SNOW) 3.5%. Fintech went with them: Affirm (AFRM) fell 6.1% and Coinbase (COIN) 6.0%.

Two of those reported after the bell, and beating did not help either of them. Palo Alto Networks earned an adjusted $1.02 a share on $3.41 billion of revenue, against roughly $0.98 and $3.35 billion expected, and guided fiscal 2027 revenue to $14.1–14.2 billion, growth of 23% to 24%. The stock slipped further in after-hours trade. MongoDB beat by more — $1.90 adjusted on $771.8 million of revenue, against $1.61 and $735.16 million expected, with revenue up 30% year over year, its fastest in several years — and raised full-year guidance above consensus on both lines. It then changed hands near $373.63 in after-hours dealing, roughly 14% under its $434.21 close, after a month in which the shares had run up about 28%.

Rates are doing the sorting

The macro backdrop explains which names got hit and which did not. Fed funds futures put the odds of a quarter-point hike at the September 16 FOMC meeting at roughly two-thirds as of Tuesday, up from a 35% to 57% range a week earlier, following Fed Chair Kevin Warsh’s hawkish Jackson Hole remarks in late August, in which he noted the Fed’s preferred inflation gauge sitting near 3.7% against a 2% target. The US ten-year Treasury yield is near 4.79%, around a twenty-month high, and UK ten-year gilts reached 5.25%, their highest since 2008.

Long-duration equity — companies whose value sits mostly in cash flows years out — is what a rising discount rate punishes first. That describes every name in the paragraph above. It does not describe Dell, which sells hardware against a backlog it can put a number on and collect against within a few quarters. The dividing line on Tuesday was not AI exposure. It was how far away the cash is.

Tuesday’s data fit the same frame. ISM manufacturing slowed to 54.6 in August from 55.6 in July, below the roughly 55.2 consensus, with new orders at 53.7 and employment at 51.2. Prices paid stayed elevated at 71.1, just under the 72 expected and unchanged from July. July JOLTS job openings fell to 7.27 million from 7.359 million, under the 7.33 million consensus, with the quits rate at 1.9%. Softer growth, sticky input costs, and crude rising into both — which is why a firm print now reads as hawkish rather than reassuring.

Where the money actually went

This was a rotation, not a liquidation. 74 of the 100 large caps in the paid feed fell, and the S&P 500 closed down 0.71% at 7,631.47, the Nasdaq Composite off 1.03% at 26,099.77, and the Dow down 419.02 points, or 0.79%, to 52,766.88. But the spread between sectors was unusually wide for a day that size.

Energy led. The energy sector ETF (XLE) rose 1.3%, Chevron (CVX) closed at $211.05, up 2.4% from $206.14, and Exxon Mobil (XOM) at $164.55, up 2.2% from $160.95. Healthcare and staples followed: Johnson & Johnson (JNJ) gained 2.0%, UnitedHealth (UNH) 1.8%, Altria (MO) 1.6%, Merck (MRK) 1.4%, AbbVie (ABBV) 1.4% and Walmart (WMT) 1.0%.

The single biggest large-cap gainer was Apple (AAPL), which closed at $325.13, up 2.6% from $316.85 on 52.4 million shares — the day John Ternus formally took over as chief executive from Tim Cook, who becomes executive chairman. The succession was announced in April, so Tuesday was the handover rather than the news, which makes the size of the move the interesting part.

Semiconductors did not follow software all the way down, but they did not hold either: Nvidia (NVDA) fell 1.5%, Broadcom (AVGO) 0.2%, Advanced Micro Devices (AMD) 2.4%, Micron (MU) 2.6% and Applied Materials (AMAT) 3.6%.

Gold kept giving ground. The SPDR Gold ETF (GLD) closed at $396.75, down 2.9% from $408.42, with spot gold at a two-week low. This is the third session in four where the classic hedge has sat out an oil shock and a Middle East escalation. Higher real rates are still winning that argument, and it remains the cleanest read on which force the market thinks is in charge.

One move outside the large-cap set deserves a mention. Moderna (MRNA) rose 9.9% to $154.28, extending a rally that began in August, when its personalized mRNA cancer vaccine — partnered with Merck and tested in more than 1,100 melanoma patients in combination with Keytruda — became the first mRNA cancer therapy to pass a Phase 3 trial.

Overnight: Tokyo led the selling

Asia extended the move rather than fading it. The Nikkei 225 closed down 2.85% at 64,325, a four-week low, and the damage was concentrated in exactly the same complex: SoftBank Group fell 6.4%, Taiyo Yuden 4.6%, Fujikura 3.9%, Tokyo Electron 3.4% and Advantest 2.5%. Japan’s ten-year government bond yield is at 3%, its highest since 1996, with Governor Kazuo Ueda signalling that a Bank of Japan rate increase is likely later this month. Hang Seng futures were off about 1.9%.

Brent crude traded near $94.86 a barrel, close to a six-week high, after a third consecutive session of gains on renewed US strikes on Iran. That is the thread connecting the bond move, the hike odds and the rotation into energy — the same thread as yesterday, pulled tighter.

What to watch today

ADP private payrolls for August, 8:15 AM ET — the last private-sector read before Friday’s employment report.
Factory orders and durable goods orders for July, 10:00 AM ET.
EIA weekly crude oil inventories, 10:30 AM ET, following Tuesday’s API figures.
The Federal Reserve’s Beige Book, 2:00 PM ET — twelve district reports on current conditions, two weeks before the September 16 FOMC meeting.
Broadcom reports fiscal third-quarter results after the close. Consensus is around $29.43 billion in revenue; the company had guided AI semiconductor revenue to about $16.0 billion for the quarter, and has forecast more than $100 billion in fiscal 2027 AI revenue. Options pricing implies a move of roughly 8%.
Whether Brent holds near $95, and whether the ten-year stays near 4.79%.
Friday’s August employment report, the last major labour data before the FOMC decision.

Not financial advice. iTrading Buddy summarizes publicly available market data and news; every figure above is sourced from the reporting available before the US open on the date shown. Verify anything you act on.