Why Dell Technologies (DELL) is an Overlooked Tech Gem to Buy Now

In a tech landscape dominated by headlines about AI, cloud computing, and cybersecurity, Dell Technologies (DELL) has quietly positioned itself as a key player in one of the most critical segments: AI infrastructure. Despite its role as a backbone for enterprises scaling AI workloads, the stock remains undervalued and underappreciated. With robust financials, strategic product launches, and strong analyst support, Dell could be a hidden gem for investors seeking exposure to the AI revolution.

Ask Aime: "Is Dell Technologies' (DELL) stock undervalued amid its growing AI infrastructure role?"

Financial Performance: A Transition to High-Growth Infrastructure

Dell’s fiscal 2025 results underscore a pivotal shift toward AI-driven infrastructure, which now accounts for over 40% of total revenue. In its second quarter (ended August 2024), revenue surged 9% YoY to $25.0 billion, exceeding estimates, while Infrastructure Solutions Group (ISG) revenue jumped 38% YoY to $11.6 billion, driven by AI-optimized servers.

Ask Aime: "Is Dell's AI-focused strategy undervalued?"

The star performer has been Dell’s AI server business, which grew to $5.8 billion year-to-date, with a backlog of $3.8 billion as of Q2 2025. Even with margin pressures from rising component costs, non-GAAP EPS rose 9% YoY to $1.89, reflecting operational discipline.

Dell’s stock has underperformed the broader market in recent months, creating a buying opportunity.

AI-Driven Growth: Dell’s Moat in a High-Growth Market

Dell’s AI Factory initiative, launched in May 2024, integrates NVIDIA’s Blackwell GPUs and liquid cooling technology, enabling servers to handle 72 GPUs per rack—a 33% increase in density. This innovation has already attracted enterprise and cloud customers, with a pipeline “several multiples” larger than the current backlog.

Analysts project Dell’s AI server revenue could hit $13.8 billion by fiscal 2026, up from an estimated $10.6 billion in 2025. Meanwhile, the Client Solutions Group (CSG), which accounts for 50% of revenue, faces headwinds in consumer PCs but remains stable in commercial markets—a segment with higher margins.

Valuation: Undervalued by Metrics, Overlooked by the Market

Dell’s Forward P/E ratio of 10.31 is slightly above its industry average of 9.74 but well below its PEG ratio of 0.84, which suggests the stock is undervalued relative to its growth prospects. A two-stage DCF analysis estimates Dell’s fair value at $163 per share, implying a 44% upside from its May 2025 price of ~$92.

Analysts have a "Moderate Buy" consensus, with a mean price target of $134.65, while bulls argue Dell’s intrinsic value could hit $163. Even bears acknowledge the $9.2 billion in cash and investments and $7.9 billion in trailing cash flow as critical safety nets.

Risks to Consider

• Storage Revenue Decline: Traditional storage sales fell 5% YoY in Q2, signaling a need for innovation.
• PC Market Softness: Consumer PC revenue dropped 22% YoY, though commercial sales remain resilient.
• Debt Levels: Dell carries $19.4 billion in long-term debt, though cash reserves and free cash flow (~$6.2 billion in 2024) mitigate refinancing risks.

The Catalyst: Upcoming Earnings and AI Pipeline Execution

Dell’s May 29, 2025 earnings report will be critical. Analysts expect $1.68 EPS (+32% YoY) and $23.16 billion revenue, with FY2026 guidance likely to reflect AI server momentum. A beat on these numbers could reaccelerate the stock, especially if Dell confirms $15 billion in AI server revenue for 2026, as hinted in prior quarters.

The expanding backlog underscores demand for Dell’s AI infrastructure solutions.

Conclusion: Dell’s Time to Shine

Dell Technologies is a low-risk, high-reward bet for investors seeking exposure to AI infrastructure growth. With $163 intrinsic value, a PEG ratio below 1, and a $15 billion AI server opportunity, the stock offers asymmetric upside. While risks like storage declines and debt exist, Dell’s cash flow, dividend yield (2.24%), and shareholder returns ($10 billion buyback authorization) provide a safety net.

The May 2025 earnings report will be the litmus test for whether Dell can sustain its AI momentum. If the results align with expectations, Dell could finally receive the valuation it deserves. For now, its undervalued status makes it a compelling buy for long-term investors.

Final Takeaway: Dell’s strategic pivot to AI infrastructure, strong cash flow, and undemanding valuation position it as an overlooked tech stock primed for growth. Investors should take advantage of the current discount before the market catches up.