1 Incredibly Cheap Artificial Intelligence (AI) Stock to Buy Before It Soars at Least 24%, According to Wall Street
News Summary
Dell Technologies (DELL) shares have gained only 5% in 2025, underperforming the Nasdaq Composite, and recently dropped nearly 9% after its fiscal 2026 Q2 results (ended Aug 1) on Aug 28. Despite this, the company reported record revenue of $29.8 billion (up 19% year-over-year) and non-GAAP earnings of $2.32 per share, both exceeding consensus estimates. The stock decline was attributed to lower-than-expected earnings guidance for the current quarter ($2.45 per share, $0.10 below consensus). However, Dell raised its full-year fiscal 2026 adjusted earnings growth forecast to 17% ($9.55 per share) and revenue guidance to 12% ($107 billion midpoint). The company shipped a record $8.2 billion in AI servers last quarter, with a $11.7 billion backlog and an updated full-year AI server revenue target of $20 billion, double the previous year. Analysts view Dell as undervalued, trading at just 13 times forward earnings compared to the Nasdaq 100 average of 29 times. Wall Street's 27 analysts have a 12-month price target of $150, implying a 24% upside. Given its earnings growth potential, the stock could reach $358 in a few years.
Background
As global demand for artificial intelligence (AI) infrastructure and devices continues its robust growth in 2025, hardware providers like Dell Technologies are experiencing significant tailwinds. Under incumbent US President Donald J. Trump's administration, economic policies may continue to support technological innovation and domestic industry growth, further stimulating corporate investments in AI. Dell, a leading global IT solutions provider, holds a significant position in the global server market and is actively expanding its AI server business. Its product portfolio spans from personal computers to high-end enterprise data center solutions, allowing it flexibility in responding to market demands. The AI server market is projected to expand at a 34% compound annual growth rate through 2030, reaching $837 billion, presenting a substantial growth opportunity for Dell.
In-Depth AI Insights
Is there a perception gap between short-term market reactions and long-term fundamentals, and what does this imply for investors? Dell's recent stock drop, primarily driven by concerns over current quarter earnings guidance, reflects market sensitivity to immediate performance. However, the company's raised full-year earnings and revenue outlook, especially the significantly increased AI server business guidance, indicates healthy core growth drivers and market share expansion. Investors should recognize that such market overreaction to short-term guidance can create buying opportunities for value investors who identify and invest in temporarily undervalued companies with strong long-term fundamentals. Dell's AI server backlog and market share gains far outweigh concerns over short-term earnings fluctuations. Are Dell's competitive advantages and strategic positioning in the AI server market robust enough to sustain growth beyond the industry average? Dell's potential to grow faster than the AI server market average is not accidental. Its advantages stem from: - Broad Customer Base and Conversion Capability: The article notes Dell's largest expansion in its customer base last quarter and its ability to convert proof-of-concepts into full production deployments, indicating strong sales and technical support. - Supply Chain and Manufacturing Scale: As an established hardware giant, Dell possesses a mature global supply chain and large-scale manufacturing capabilities, allowing it to quickly respond to surging AI server demand and scale shipments, a challenge for many emerging competitors. - Product Depth and Integration: Dell offers not just standalone servers but end-to-end IT solutions, including storage, networking, and services. This is crucial for enterprises deploying complex AI infrastructures, fostering "sticky" customer relationships.