One “old tech” stock that has emerged as a genuine artificial intelligence player this year is Dell Technologies (NYSE: DELL).
Dell started as a personal computer giant, with founder Michael Dell crafting PCs from his dorm room, evolving into a major player in enterprise and personal computing. After acquiring server giant EMC in 2016, Dell became the largest branded enterprise server company. This year, driven by new AI servers, Dell’s stock has soared by 52.8%.
Positive Indications for AI Pipeline Growth
Despite concerns over AI server margins earlier in the year, Dell’s AI-optimized servers displayed enhanced margins. With operating margins for the server business improving, management highlighted robust future demand, debunking worries about the sustainability of the AI spending trend.
Revival of Traditional Servers
In addition to AI-optimized servers, traditional servers are experiencing a resurgence. Dell reported sequential growth in its traditional server portfolio for five consecutive quarters, marking a turnaround from its extended decline. The shift is attributed to the aging installed base, coupled with new server designs that offer increased efficiency, allowing for server consolidation in data centers.
Anticipated Rise in PC Sales
While attention is on AI and servers, Dell’s core PC business remains significant, making up over half of second-quarter revenue. With an aging pandemic-era PC installed base, the market is ripe for a refresh, particularly as new AI PCs featuring neural processing engines enter the market. Additionally, Microsoft’s decision to end support for Windows 10 in 2025 is expected to drive PC upgrades.
Positioning Dell in the AI Portfolio
For investors eyeing AI exposure, Dell presents an attractive option with a reasonable valuation. With the sustained demand for AI servers, projected growth in traditional servers and PCs, Dell is poised to potentially surpass 2025 earnings estimates.
Before considering Dell Technologies, investors should weigh available information. The Motley Fool Stock Advisor analysts have identified promising stocks in the market, omitting Dell Technologies from the list. These selected stocks show growth potential over the coming years, akin to historical examples such as Nvidia’s significant returns since 2005.*