Dell Technologies (DELL) — AI Server Business Gaining Traction While Stock Trades at Discount
Current Price: Trading around $119
Dell Technologies has been conspicuously absent from most AI infrastructure conversations, overshadowed by chipmakers and hyperscalers. But the company is quietly building a significant AI server business that deserves investor attention, particularly at current valuations.
The stock trades at approximately 12 times fiscal 2026 anticipated per-share earnings of nearly $10—a modest multiple for a company experiencing double-digit revenue growth driven by AI demand. Third-quarter revenue grew 11% year-over-year to $27 billion, reflecting Dell’s ability to offer well-customized high-performance platforms for AI workloads.
The AI opportunity is materializing faster than many investors recognize. CFO David Kennedy commented in the Q3 fiscal year 2026 report published in November 2025: “FY26 will be another record year, and we’re raising our AI shipment guidance to roughly $25 billion, up over 150% year over year, and revenue guidance to $111.7 billion, up 17%.”
That $25 billion AI shipment guidance represents dramatic growth in a business segment that barely existed for Dell a few years ago. The company is capturing demand from enterprises building AI infrastructure without going directly to hyperscalers, as well as from sovereign AI initiatives where governments are investing in domestic AI capabilities.
COO Jeff Clarke provided additional context on the pipeline strength: “Our five-quarter pipeline is multiples of our $18.4 billion backlog with a mix of neocloud, sovereign, and enterprise customers.” A pipeline measuring multiples of an $18.4 billion backlog suggests Dell has substantial visibility into future AI infrastructure demand extending well beyond the current fiscal year.
The customer mix matters. Neocloud customers represent companies building cloud infrastructure outside the traditional hyperscaler model. Sovereign customers are governments investing in AI capabilities for national security and economic competitiveness. Enterprise customers are corporations deploying AI for internal applications. This diversification reduces dependence on any single customer segment and provides multiple growth vectors.
Despite this encouraging fundamental backdrop, investors have sold off the stock. Dell shares are now down nearly 30% from their early-November peak, creating a disconnect between business performance and stock price. The weakness appears driven by broader malaise surrounding AI stocks rather than Dell-specific concerns.
This creates opportunity. Dell is smaller and more nimble than traditional enterprise hardware companies, allowing it to customize solutions for specific AI workloads and customer needs. The company’s long-standing relationships with enterprise customers provide distribution advantages as these organizations build AI capabilities.
The 12 times forward earnings multiple looks attractive compared to other AI infrastructure providers trading at significantly higher valuations. Dell offers AI exposure without the premium multiples that chip designers and cloud providers command, while still participating in the infrastructure buildout through server and storage systems.
Analysts maintain a consensus price target of $115.39, essentially in line with current levels around $119. While this suggests limited near-term upside based on Street expectations, it also indicates the stock has already absorbed significant pessimism. Any positive catalysts—stronger AI server demand, margin improvements, or broader AI sentiment recovery—could drive upward revisions.
The risk is that AI infrastructure spending moderates or that hyperscalers increasingly build their own server infrastructure rather than purchasing from Dell. However, the diversified customer base across neocloud, sovereign, and enterprise segments provides some insulation against hyperscaler purchasing patterns.
Dell represents a value-oriented approach to AI infrastructure investing. The stock trades at a reasonable multiple despite growing AI revenues that should reach $25 billion in fiscal 2026. For investors seeking AI exposure without paying premium valuations, Dell offers a compelling risk-reward profile at current levels.
