Should You Buy, Sell, or Hold Dell Technologies Stock at a P/S of 0.77x?

The price-to-sales (P/S) ratio for Dell Technologies (DELL) has dipped to 0.77x, a level that suggests the stock is trading at a significant discount to its peers. This metric, which compares a company's stock price to its revenue per share, often signals undervaluation—particularly for growth-oriented firms like Dell, which are scaling sales in emerging markets such as artificial intelligence (AI) infrastructure. While concerns about a sluggish PC market linger, Dell's strategic pivot toward enterprise technology and its AI-driven momentum may justify a buy or hold stance for investors willing to look past near-term headwinds.

Why Dell's P/S Ratio Signals Undervaluation

Dell's current P/S ratio of 0.77x is far below the 1.43x industry median for hardware manufacturers, according to recent data. Historically, Dell's P/S ratio has fluctuated between 0.15x and 1.31x over the past decade, but its current level suggests skepticism around its ability to grow revenue. However, this skepticism may be misplaced. Dell's Infrastructure Solutions Group (ISG)—which includes servers, networking, and storage—has become a growth engine. In Q2 2025, ISG revenue surged 38% year-over-year to $11.6 billion, driven by AI-optimized server sales that hit $3.2 billion in the quarter alone. This segment now accounts for nearly half of Dell's total revenue, up from 35% just two years ago.

The backlog for AI infrastructure has also ballooned to $3.8 billion, with Dell's pipeline expanding to “several multiples of backlog,” per CFO Jimmy Mergeners. This suggests strong demand for Dell's enterprise solutions, which are critical to deploying AI models across industries like healthcare, finance, and manufacturing. Meanwhile, the P/S ratio's focus on revenue (not earnings) makes it a particularly relevant metric for Dell, which is reinvesting heavily in R&D and partnerships to dominate AI infrastructure—areas where profitability may lag temporarily.

The Case for Undervaluation: AI and Ecosystem Strength

Dell's undervaluation isn't just about its P/S ratio; it's about its strategic advantages in the AI race. The company has built a robust ecosystem with partners like NVIDIA, Intel, and AWS, enabling it to offer end-to-end AI solutions. For instance:- Dell's PowerEdge servers are optimized for NVIDIA's H100 GPUs, making them a top choice for data centers.- Its APEX cloud infrastructure integrates seamlessly with hybrid cloud environments, appealing to enterprises wary of vendor lock-in.- The ISG's 80% year-over-year jump in servers and networking revenue underscores demand for Dell's AI-ready hardware.

Headwinds: The PC Market and Cash Flow Concerns

The Client Solutions Group (CSG), which accounts for 50% of Dell's revenue, has struggled. Consumer PC sales fell 22% year-over-year in Q2 2025, reflecting a saturated market and shifting consumer spending. While commercial PC sales remained steady, the segment's operating income dropped 21%, highlighting margin pressures. Additionally, Dell's cash flow from operations fell 58% year-over-year to $1.3 billion, partly due to higher investments in AI infrastructure and working capital needs.

Investment Thesis: Buy or Hold with a Long-Term Lens

Dell's P/S ratio of 0.77x is compelling for investors who believe its AI infrastructure growth will outweigh PC market headwinds. Key positives include:1. AI Momentum: Dell's ISG is capturing a leadership position in AI hardware, with a backlog that suggests multi-year demand.2. Balance Sheet Strength: $6 billion in cash and investments, plus a $1 billion shareholder return program in Q2, signal financial resilience.3. Valuation Discounts: At 0.77x P/S, Dell trades at less than half the software sub-sector averages (e.g., Application Software at 8.8x P/S), even though its ISG growth mirrors software's trajectory.

Risks to Consider

• PC Declines: If consumer PC sales continue to slump, CSG could remain a drag.
• Competition: Rivals like HPE and AWS are also vying for AI infrastructure share.
• Margin Pressures: High R&D spending and supply chain costs may delay profit growth.

Conclusion: A Buy for Patient Investors

Dell's 0.77x P/S ratio reflects short-term concerns about its PC business, but the stock's valuation appears disconnected from its long-term AI growth story. Investors with a 3–5 year horizon could buy or hold the stock, as Dell's ecosystem advantages and ISG momentum position it to benefit from the AI boom. However, those focused on near-term returns or defensive plays may want to wait for clearer signs of stabilization in the PC market.

Final Verdict: Hold with a Buy bias—Dell's undervaluation and AI tailwinds make it a compelling long-term opportunity, though risks in the PC segment warrant caution.