Lenovo Group (00992.HK) shares surged over 9% on September 18, reaching HK$37.44 with a market capitalization of HK$465.1 billion, briefly surpassing Meituan-W (03690.HK) in intraday trading. This rally comes as Lenovo's Chief Financial Officer makes a bold case for the company's long-term positioning in AI infrastructure.
At a recent AI investment summit in Beijing themed around certainty in the AI infrastructure era, Lenovo's Senior Vice President and CFO, Zheng Xiaoming, addressed key market concerns including the AI infrastructure cycle, profitability, peer comparisons, enterprise AI demand, and company valuation. His comments highlight why he believes the market has significantly undervalued the tech giant.
Where to Begin
Zheng argued that Lenovo's current valuation remains substantially discounted relative to Dell Technologies, a key global competitor. "Our current valuation is only one-seventh of Dell's, yet our scale and net profit are not one-seventh of theirs 鈥?we are completely undervalued by the market," he stated. This discrepancy forms the core of his investment thesis.
Why a Decade of Growth?
Addressing whether global AI computing investment is a long-term opportunity or short-term hype, Zheng pointed to Lenovo's tangible business momentum. The company's AI server reserved orders have reached a scale of over $50 billion, demonstrating sustained real-world demand. He views AI infrastructure as entering a long-term construction phase for "AI factories" or "computing power plants," rather than a speculative bubble.
This trend is attracting continuous global capital inflows. Reports indicate that in August, Nvidia partnered with major financial institutions including Blackstone and KKR to establish an AI computing infrastructure financing platform, planning to mobilize over $500 billion for AI infrastructure development.
Why Just a Handful of Winners Emerge
Lenovo's x86 server shipments have now climbed to first place globally, according to latest data. Zheng acknowledged that due to past policies and historical factors, Lenovo entered the overseas AI server market relatively late. However, after two years of adjustment, the company has strengthened collaborations with key suppliers and customers, leveraging its supply chain, technology, and market advantages to maintain significant room for customer expansion.
The $50 billion order backlog is entirely derived from AI server business. For some new cloud customers, potential business scale has expanded rapidly from initial contact to significant opportunity within just months, with order opportunities growing exponentially. However, Zheng cautioned that the new cloud market carries risks, as participants differ significantly in capital strength, customer resources, and access to critical resources like electricity and land. While AI infrastructure currently faces supply shortages, only a few players will ultimately establish sustainable positions long-term.
Balancing Growth and Profitability
As AI infrastructure demand grows, upstream costs are shifting. Storage chip prices have risen substantially since the second half of last year, CPU prices have increased this year, and GPU pricing remains strong. Zheng believes that despite component price increases, newer hardware delivers continuously improving performance and efficiency. For cloud providers and large model companies, as long as new computing power output covers investment costs, this expansion remains a relatively healthy industry cycle. The supply landscape will continue to evolve as global supply expands.
From Efficiency Gains to Valuation Reassessment
Whether demand translates into profits and shareholder returns is another key metric for evaluating AI infrastructure companies. Zheng stated Lenovo will continue balancing growth and profitability. In April, Lenovo announced a target of $100 billion in annual revenue within two years, which now appears achievable ahead of schedule, alongside progress toward a mid-term net profit margin target of 5%. With growth in value-added services, long-term margins could potentially reach 8% or higher.
Zheng believes Lenovo possesses advantages in technology, supply chain, and channels compared to Dell, positioning the company to match Dell's profitability levels. On the secondary market, Lenovo shares have surged as much as 250% year-to-date, with recent trading above HK$37.5, up over 9%. He reiterated that despite this rally, the stock remains significantly undervalued relative to Dell, given that Lenovo's revenue and net profit do not have a 7x gap with its competitor.
Beyond Immediate Gains
Future value appreciation extends beyond external AI industry tailwinds. Lenovo's current growth opportunities are backed by real orders, with numerous potential customer prospects advancing. The company continues optimizing customer expansion and pricing mechanisms internally. In April, Lenovo completed the acquisition of storage company Infinidat, significantly strengthening its high-end enterprise storage technology capabilities. Future synergies between storage and services businesses are expected to drive improved overall margins.
Much Larger Demand Awaits
More significantly, Zheng predicts that the largest AI demand may not yet have been unleashed. Global enterprises are still in early stages of AI investment, needing first to integrate internal databases, organizational structures, business processes, and IT systems. As these foundational tasks complete, enterprise-level AI inference markets will release substantial incremental growth. Additionally, cost and security considerations will continue to drive localized AI deployments.
As a global AI infrastructure leader, Lenovo's hybrid AI strategy spans devices, infrastructure, and services, positioning AI as a "decade-long opportunity." While capital markets are beginning to recognize Lenovo's AI transformation, from the perspective of the entire industry cycle, this is merely the beginning phase. Disclaimer: This content is for informational purposes only and does not constitute investment advice. Investors should act at their own risk.