Dell Technologies Inc. (NYSE:DELL) has been exhibiting a performance akin to market leader Nvidia Corp. (NASDAQ:NVDA) in recent times, with investors anticipating a similar boost from artificial intelligence (AI).
The renowned manufacturer of personal computers and servers has emerged as a major beneficiary of the AI surge, a narrative likely to be reinforced with the release of its first-quarter results. Signs of improving growth prospects could further bolster a stock that’s currently at a record high but still trades at a discount compared to other tech favorites.
Dell recently captured attention by unveiling a lineup of PCs optimized for AI, fueling hopes for a much-awaited upgrade cycle from both consumers and businesses. HP Inc.’s recent report of the first increase in PC sales in two years adds to this optimism.
Furthermore, Dell’s high-performance servers have received praise from Nvidia CEO Jensen Huang, who hailed the “great partnership” between the two companies at the GTC conference. He also acknowledged Dell’s prowess in building end-to-end systems of large scale for enterprises.
Doug Clinton, managing partner at Deepwater Asset Management, highlighted Dell’s significant role in the AI ecosystem, suggesting that it hasn’t received enough credit for its contributions.
The company’s shares have surged by 127% this year, supported by a six-day rally, marking their longest streak since July. Despite a 3% dip on Thursday, much of this year’s gain followed Dell’s previous report, which showcased massive demand for its servers driven by AI.
Dell, with a market capitalization exceeding $127 billion, has largely remained under the radar of investors. However, it’s poised for potential inclusion in the S&P 500 index, a move that could catalyze its stock. Analysts anticipate this inclusion, viewing it as an opportunity for Dell to attract a broader investor base and benefit from passive funds tracking the index.
Bank of America analyst Wamsi Mohan raised his price target for Dell, citing the positive impact of AI servers, high-end storage, and PCs. With over 80% of firms recommending buying Dell shares, analysts remain bullish on its prospects.
Despite the growing optimism, Dell’s multiple remains relatively modest, trading at 22 times estimated earnings, which is lower than the Nasdaq 100 Index and other AI plays like Nvidia and Microsoft Corp. However, Dell’s multiple represents a record for the stock, indicating a heightened appreciation for its strategic position in the AI market.
Dan Flax, senior research analyst at Neuberger Berman, emphasized Dell’s increasing significance in the AI landscape. However, he cautioned that while demand for AI systems remains robust, cyclical fluctuations in other segments of Dell’s business could pose challenges, particularly in the event of a macroeconomic downturn.
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