Amidst cautious economic outlooks and delayed hardware refreshes, CDW's Q1 2024 earnings transcript reveals a silent revolution brewing: their strategic positioning in the AI landscape. While Wall Street focuses on short-term headwinds impacting hardware sales, CDW is actively shaping the future of enterprise AI adoption.

CDW's approach to AI is a measured, long-term strategy leveraging its existing strengths. They recognize that the current AI landscape is nascent, with most customers in the assessment phase. CDW is focused on building a foundation for sustained growth by leveraging its deep technical expertise, industry-specific knowledge, and full-stack portfolio.

A key insight from the transcript: CDW is not seeing AI cannibalize existing IT budgets. Instead, AI investments are funded across the organization, signaling that customers view AI as a fundamental business transformation tool. This reinforces CDW's position as a strategic partner for businesses leveraging AI for operational efficiency and strategic goals.

"Right now, most of our customers are at the initial stages of the assessment process, developing and analyzing use cases and adopting data governance best practices to deliver insights and ensure end to end security. Essentially, they are exploring the art of the possibility and working through the science of exactly how do we do this. - Chris Leahy, CDW Q1 2024 Earnings Call"

CDW's success in the AI space is already a reality. While services engagement currently dominates (high demand for their "AI Discovery" and "MOAT" consulting solutions), they're seeing success in full-stack AI deployments. An example is a semiconductor and software designer who partnered with CDW to build a custom, on-premise AI platform, resulting in a multi-million dollar deal.

Projected Growth of CDW's AI Segment

Based on a hypothetical $50 million AI revenue base in 2024 and a conservative 20% CAGR, we can project significant growth in this segment. This does not factor in hardware acceleration or potential acquisitions.

CDW is investing in expanding its AI capabilities: partnerships with innovative AI startups, developing in-house AI experience for operational efficiency, and leveraging existing customer intimacy and deep vertical expertise.

While widespread AI adoption will take time, CDW anticipates an arc of adoption moving from applications and services to edge inference and, eventually, to the data center. This long-term vision aligns with CDW's strengths and commitment to serving its customers across the entire IT lifecycle.

The implications for investors are clear: CDW is quietly laying the groundwork for a dominant position in the rapidly evolving AI landscape. Their strategic focus, evidence of incremental AI budget allocations, and early wins paint a compelling picture of future growth potential.

"Fun Fact: CDW was founded in 1984 by Michael Krasny, who started by selling used computers from his Chicago apartment. Today, CDW is a Fortune 500 company and a leading provider of IT solutions."