Shares of Dell Technologies (NYSE:DELL) have dropped 8.1% over the past six months, raising questions about whether now is the time to invest. Despite this decline, Dell’s expanding AI portfolio, strong partnerships, and market leadership suggest potential long-term growth for investors willing to take the plunge and buy Dell stock.

Key Drivers Behind Dell’s AI Strategy

Dell’s recent developments in artificial intelligence (AI) have been transformative. The launch of the Dell AI Factory is central to this evolution, enabling AI workloads with a robust ecosystem of partners including NVIDIA (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), and Meta Platforms (NASDAQ:META).

This collaboration has enhanced Dell’s capabilities to simplify AI application development. The integration of NVIDIA’s Tensor Core GPUs and AI Enterprise software into Dell’s portfolio supports faster deployment and scalability of AI solutions.

In Q2 fiscal 2025, Dell reported $3.1 billion in AI server shipments and expects strong demand to drive significant revenue growth in the second half of the fiscal year.

Dell’s Expanding AI Portfolio

Dell’s AI hardware offerings, such as the PowerEdge XE9712 and M7725 servers, demonstrate its innovation. These systems cater to large-scale language model training and high-performance computing needs.

The company’s GenAI solutions, developed with Intel, provide integrated platforms for seamless AI deployment. These solutions address a range of applications, from content creation to data generation, ensuring Dell remains competitive in the burgeoning AI market.

Additionally, Dell is advancing edge AI capabilities by working with NVIDIA to develop telecom-focused solutions like the PowerEdge XR8000 server.

Financial Growth Driven by AI

Dell’s fiscal 2025 revenue forecast is between $95.5 billion and $98.5 billion, indicating 10% growth at the midpoint. The Infrastructure Solutions Group, fueled by AI-related demand, is expected to grow by 30%.

The company projects earnings of $7.80 per share (+/- $0.25) for fiscal 2025, reflecting a 9% year-over-year increase. These robust expectations highlight Dell’s ability to capitalize on AI’s rapid growth.

Dell estimates the AI hardware and services market will reach $174 billion by 2027, with a compound annual growth rate (CAGR) of over 22% between 2023 and 2027. Its strong engineering focus in data center networking and AI systems positions the company to capture this opportunity.

Valuation: Dell Shares Appear Undervalued

Dell stock trades at a forward price-to-earnings (P/E) ratio of 14.57x, significantly below the sector average of 26.98x, indicating it is undervalued relative to its peers.

The shares are also trading above the 50-day and 200-day simple moving averages, signaling a bullish trend. With a Zacks Value Score of “A,” Dell’s stock appears to offer a compelling entry point for value-focused investors.

Partnerships Strengthen Dell’s Competitive Edge

Dell’s collaborations with AMD, Intel, NVIDIA, and other key players in the tech ecosystem have solidified its reputation as a leader in AI infrastructure. By leveraging these relationships, Dell ensures a steady pipeline of innovative solutions for enterprise and cloud customers.

In Q2 fiscal 2025, the company secured $3.2 billion in AI-related orders, with a strong backlog of $3.8 billion. This expanding pipeline underlines the growing adoption of Dell’s AI technologies across various industries.

Conclusion

Dell Technologies has successfully positioned itself as a leader in the AI revolution, backed by innovative hardware, strategic partnerships, and a focus on customer-centric solutions.

While Dell stock’s recent 8% decline may deter some investors, its valuation, robust AI growth potential, and bullish long-term outlook make it an attractive option. For investors seeking exposure to the AI sector, Dell stock offers a promising opportunity to capitalize on the ongoing digital transformation.

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