Why Dell Technologies Could Lead AI Stocks by 2027

The technology sector has faced a significant downturn recently, offering investors a unique opportunity to find undervalued stocks. Heavyweights like Nvidia and Micron Technology are currently trading at attractive prices due to their recent declines. However, another player in the artificial intelligence (AI) sphere is emerging as a potential standout investment, and that company is Dell Technologies.

Current Stock Landscape

Nvidia, widely known for its graphic processing units, boasts a forward price-to-earnings (P/E) ratio of just 11, compared to its five-year average of 33. Despite its decline, Nvidia is projected to see considerable revenue growth ahead.

Similarly, Micron Technology is trading at around 5 times its forward earnings, notably less than its five-year average of 10.6. Analysts are optimistic about Micron's future earnings per share (EPS), which is expected to more than double in the current fiscal year. This backdrop positions both companies for potential recovery in the coming years, particularly as we approach 2027.

Dell Technologies: A Hidden Gem

Amidst this turbulence, Dell Technologies (DELL) has shown exceptional growth, with its stock surging by an impressive 192% throughout 2026. Yet, like its peers, Dell has also felt the impact of the recent tech stock sell-off, resulting in a 36% decrease in value over the past month. This decline has created an enticing valuation of just 12 times forward earnings, making Dell a potentially lucrative investment right now.

Soaring Demand for AI Infrastructure

Dell Technologies has capitalized on the robust demand for AI-optimized server solutions. During the last quarter, the company reported non-GAAP EPS tripling year-over-year to $7.04, reflecting its strong position in the market.

As a key provider of essential components, including server racks and liquid-cooling systems tailored for AI applications, Dell is witnessing an overwhelming surge in demand. The company's order book illustrates this trend; in the second quarter of fiscal 2027, Dell received a staggering $60.9 billion in AI server orders, far surpassing its $16.4 billion revenue for that segment.

The resulting backlog of AI server orders now stands at an astonishing $95 billion, indicating the company's capacity to meet future demands while also engaging in traditional server and networking solutions—where revenue also grew by 122% year-over-year to $10.5 billion.

Looking Ahead: Growth Projections for Dell

Dell’s management is optimistic, pointing out that in the past 12 months, the company has secured $131.7 billion in AI server orders, with the last quarter demonstrating a notable increase in demand. Their recent statistic about acquiring nearly half of their 6,500 AI-centric customers within the last three quarters showcases their growing market presence.

Looking towards fiscal 2027, analysts forecast an adjusted EPS of $25.50 for Dell, reflecting an astounding 148% growth compared to the prior year. Although projections for fiscal 2028 anticipate a more tempered growth rate of around 17%, the long-term outlook remains encouraging. With potential annual EPS growth nearing 40%, Dell could see its earnings reach $33.15 by the end of fiscal 2028.

Investment Takeaway

If Dell's P/E ratio aligns with the S&P 500 index, which typically trades at around 19 times earnings, its stock could appreciate significantly. This translates to a potential share price of $630 by early 2029, representing a substantial gain of approximately 72% within a short timeframe.

Investors might want to take advantage of the recent dip in Dell's stock price as a buying opportunity, especially given its strong fundamentals and the remarkable growth trajectory in AI infrastructure. As AI demand continues to escalate, Dell Technologies is well-positioned to thrive in an evolving tech landscape.