Source: Zhitong Finance

$Dell Technologies (DELL.US)$Recent stock price movements are similar to market leader Nvidia, as investors are betting that the PC and server maker will also be boosted by artificial intelligence. Dell Technologies is becoming one of the biggest winners in the artificial intelligence boom, and the company's results for the first quarter of fiscal year 2025, which will be announced after the US stock market on Thursday, may confirm this statement. Improved performance growth prospects are likely to continue to support Dell Technology's stock price. Although the stock is currently at a record high, the stock is still discounted compared to other popular technology stocks.

Dell Technologies recently launched a line of personal computers optimized for artificial intelligence, which has aroused excitement and made people expect that these features may trigger the company's long-awaited upgrade cycle. Dell Technology's counterpart HP showed the company's PC sales growth for the first time in two years, according to the results announced after the US stock market on Wednesday. This is a good sign for Dell Technologies.

Meanwhile, Dell Technologies' high-performance servers were recognized by Nvidia CEO Hwang In-hoon. At the GTC conference, Huang Renxun praised Nvidia's “good partnership” with Dell Technology and stated that “no one can do a better job than Dell Technology in building large-scale end-to-end systems for enterprises.”

Doug Clinton, managing partner at Deepwater Asset Management, said Dell technology “has become a very important part of the AI ecosystem, but it still hasn't received enough praise.” He said, “The PC and server business will drive Dell Technology's growth over the next few years, which is beneficial to both stock prices and price-earnings ratios. We really see it as a growth and value investment because its growth is still underappreciated, and its price-earnings ratio is very low compared to other AI investments.”

Dell Technologies shares have risen 134% since this year. The stock closed higher over the past six trading days, the longest continuous increase since July last year. One reason why Dell Technology has been somewhat unnoticed by investors is that although its market capitalization exceeds 127 billion US dollars, which is higher than the market value of the vast majority of S&P 500 stocks, it is not a component of the S&P 500 index.

Analysts expect Dell Technologies to be included in the S&P 500 Index and see this as a potential catalyst for the stock. Becoming a component of the S&P 500 index will attract Dell Technologies a group of new investors based on the S&P 500 index, as well as passive funds that track the index.

Bank of America analyst Wamsi Mohan said, “Dell Technologies is still an under-held and underweighted stock. Its potential catalysts are artificial intelligence and the possibility of being included in the S&P 500 index.” He raised his target price for Dell Technology due to the favorable impact on artificial intelligence servers, high-end storage, and personal computers. Morgan Stanley also ranked Dell Technology's stock as the top choice, saying it is the best stock to take advantage of server growth momentum and influence storage demand and improvements in the PC market.

According to the data, under this optimism, investors' expectations for Dell Technology's net revenue for fiscal year 2025 increased by 7.6%, and revenue expectations increased by 1.3%. The stock's price-earnings ratio is 22 times, a significant discount compared to the Nasdaq 100 Index, and lower than other artificial intelligence companies such as Nvidia, Ultra Micro Computer (SMCI.US), and Microsoft (MSFT.US). However, Dell Technologies' current price-earnings ratio has reached a new high, far above the five-year average of 5.8 times its five-year average.

Dan Flax, senior research analyst at Neuberger Berman, said: “Dell Technologies is becoming an increasingly strategic supplier in the field of artificial intelligence. But compared to a few months ago, people are taking Dell technology a lot more seriously.” “Demand for AI systems is still healthy, but the rest of the company's business is still cyclical, and if we see a macroeconomic downturn, even a growth narrative as strong as AI could slow down.

edit/lambor