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Following the Dell Technologies World 2024 event in May, DELL stock reached its all-time high price of $179.21. However, after promoting the event with the iconic Las Vegas Sphere, DELL stock went down by 23% since the market correction took hold.

Nonetheless, DELL shares have gained 52% value year-to-date, owing to its AI initiatives announced at the show. First revealed in March during Nvidia’s GTC conference, Dell’s partnership with the AI chip-making giant expanded through Dell AI Factory for edge solutions and advanced servers to optimize generative AI workloads.

In light of this shift, should the legacy PC/laptop vendor be considered as a stealth AI stock?

How Has AI Affected Dell’s Bottom Line?

During the year, Dell beat all four quarterly earnings per share (EPS) estimates, from Q4 ‘23 to Q3 ‘24. On August 29th, the company delivered its latest earnings for fiscal Q2 ending August 2nd. 

Dell’s revenue increased by 9% year-over-year to $25 billion, while its net income increased by 85% to $841 million. Infrastructure Solutions Group (ISG) received the largest revenue boost of 38% to $11.6 billion, showcasing that server and networking demand for AI is not subsiding. Additionally, Dell’s backlog was worth $3.8 billion, but the company’s “pipeline has grown to several multiples of our backlog.”

However, it bears keeping in mind that Dell’s legacy business model is highly cyclical, from PCs and peripheral displays to IT infrastructure. Within the computer hardware sector, Dell holds a 15.84% market share, above other vendors like HP but behind Apple’s enviable 59% market share.

Dell’s vulnerability to market cyclicality is revealed in the latest earnings, as the company’s Client Solutions Group (CSG) tracked a 22% YoY decline within the Consumer division. Altogether, though, the ISG division lifted Dell’s revenue to a combined $24.1 billion, a 12% YoY growth.

In other words, AI demand greatly offset Dell’s market cyclicality. But could these offerings carry the growth further?

What Does Dell Put on the AI Table?

In the words of Nvidia CEO Jensen Huang, “Generative AI requires a new type of computing infrastructure—an AI factory that produces intelligence.” Dell’s contribution to this emerging infrastructure comes from the aforementioned Dell AI Factory, integrated with Nvidia’s full-stack software platform.

Borrowing from Dell’s legacy vendor expertise this means that customers can expect pre-validated full-stack solutions with the help of three main offerings:

• Dell PowerEdge XE9680L – supporting Nvidia’s latest Blackwell chips, this server represents the highest rack-scale density, at 33% more GPU per node and 20% more PCIe Gen. 5 slots. All boosted with innovative direct liquid cooling (DLC).
• Dell NativeEdge – the company’s platform that integrates with Nvidia AI Enterprise to automate the deployment of AI apps.
• Dell Powercale F910 – the latest high-end all-flash storage platform specifically designed to handle AI and high-performance computing (HPC) workloads. The F910 provides up to 127% increase in streaming performance for AI’s time-to-insights.

Alongside improved PowerSwitch products for networks, co-developed with Broadcom (NASDAQ: AVGO) and Nvidia (NASDAQ: NVDA), Dell fully embraced the AI revolution. After Microsoft introduced its Copilot Plus, Dell already has five new Dell AI PCs on offer.

At the aforementioned Dell Technologies World 2024 show, CEO Michael Dell forecasted demand for AI tokens to go up to 1 quadrillion by 2028, making AI applications “as ubiquitous as the Internet, as electricity.”

Dell’s Elevated Price Targets

With earnings per share beaten across four consecutive quarters, owing to AI servers and storage, DELL stock now has a strong upside potential. Dell’s AI pipeline has been elevated from $11 billion to $13 billion, which is up from $8 billion to $10 billion estimates, per Bernstein Research analysts.

Aggregated through Nasdaq’s forecasting data across 14 analysts, the average DELL price target is $147.54 per share. Against the present price of $112.55, this would be 31% potential upside for DELL stock.

Against the 52-week average of $100.29, even the low estimate of $106 makes DELL stock bullish. At the high ceiling forecast of $185, DELL shares have a potential for 64% returns. 

Lastly, existing Nvidia shareholders should note Huang’s address at the show. Huang stated that the partnership between Dell and Nvidia will be the “biggest go-to-market in AI computing in history.”

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