The Zacks Analyst Blog Dell, Super Micro Computer, NVIDIA and Microsoft
News Summary
Zacks.com's analyst blog highlights Dell Technologies (DELL) as a "dirt cheap" stock, trading at a forward 12-month P/E of 14.87x, significantly below the Zacks Computer & Technology sector's 29.15x and Super Micro Computer's 16.53x. DELL's shares have risen 29.5% year-to-date in 2025, surpassing its sector and industry, primarily due to robust demand for AI servers driven by digital transformation and generative AI applications. The company reported $8.2 billion in AI server shipments in Q2 fiscal 2026, with a strong AI backlog of $11.7 billion, and forecasts $20 billion in AI server shipments for the full fiscal year. Dell has significantly expanded its AI portfolio with new offerings like the PowerEdge XR8720t for Open RAN and an upgraded AI Data Platform in collaboration with NVIDIA, enhancing capabilities for AI tasks. Strategic partnerships with companies like NVIDIA and Microsoft, including a recent deal with IREN to provide NVIDIA GB300 GPUs for Microsoft's AI infrastructure, further bolster Dell's growth prospects. Dell provided optimistic Q3 fiscal 2026 guidance, projecting revenues between $26.5 billion and $27.5 billion (midpoint $27B, +11% YoY) and non-GAAP EPS of $2.45 (+/- 10 cents) (midpoint, +11% YoY). The stock currently holds a Zacks Rank #2 (Buy) and a Growth Score of B.
Background
Dell Technologies is a leading global technology company specializing in providing computers, servers, storage, networking, software, and IT services and solutions. The company has long held a significant position in the enterprise hardware market, particularly in the server segment. Currently, AI technology, especially generative AI, is driving a massive transformation in global data centers and computing infrastructure, leading to an explosion in demand for high-performance AI servers and related solutions. NVIDIA is a leader in AI chips, with its GPU products being central to AI computing, while Microsoft is a major driver of cloud computing and AI application development. Super Micro Computer is a rapidly growing competitor in the AI server market, known for its quick time-to-market and innovative designs.
In-Depth AI Insights
Does Dell's "cheap" valuation truly reflect the market's perception of its AI server leadership? - The market's forward P/E valuation of 14.87x for Dell, significantly below the industry average (29.15x) and closest peer Super Micro Computer (16.53x), may suggest a lag or skepticism in fully pricing in its AI server growth potential. - While Dell demonstrates strong AI server shipments and backlog, reaching a projected $20 billion for FY26, the cyclical nature or margin pressures from its traditional businesses (e.g., PCs and storage) might still be weighing down the overall valuation. - Investors might still be evaluating Dell's ability to translate its existing scale and customer relationships into sustained, high-margin growth within the highly competitive AI infrastructure market, especially against agile competitors like Super Micro Computer. What are the strategic implications of Dell's partnerships with giants like NVIDIA and Microsoft for the AI infrastructure market landscape? - Dell's deep collaborations with NVIDIA and Microsoft, particularly the IREN deal to supply NVIDIA GB300 GPUs for Microsoft, not only solidify Dell's position as a critical AI infrastructure provider but also underscore its importance within the Cloud Service Provider (CSP) ecosystem. - These partnerships enable Dell to integrate industry-leading AI chips and cloud platforms, offering more comprehensive, end-to-end AI solutions. This enhances its competitiveness across AI workloads like training, inference, and RAG, differentiating it from competitors who might focus on single aspects. - This could also signal further consolidation in the AI infrastructure market, with major tech players forming tighter ecosystems through strategic alliances rather than solely relying on hardware sales to secure customers and market share. How will Dell's AI Data Platform upgrades and Open RAN offerings serve as long-term growth drivers? - Dell's September 2025 introduction of the PowerEdge XR8720t for Open RAN/Cloud RAN and its October 2025 upgrade of the AI Data Platform (in collaboration with NVIDIA) demonstrate a strategic focus on expanding AI application scenarios and optimizing data processing capabilities. - The Open RAN solution aims to lower costs and boost performance for telecom and edge deployments, opening up new high-growth markets for Dell in 5G and edge computing, potentially becoming another significant growth engine alongside its AI server business. - The enhanced AI Data Platform, especially its integration with the NVIDIA AI Data Platform, enables better management and utilization of distributed data, accelerating AI model training and deployment. This is a crucial value proposition for enterprise customers, poised to drive growth in its software and services revenue.