Could it be that the Advancement of Artificial Intelligence (AI) might Propel Dell's Shares to Soar in 2025?

Could it be that the Advancement of Artificial Intelligence (AI) might Propel Dell's Shares to Soar in 2025?

Dell Technologies might not be your go-to name when thinking about AI computing, but it's worth considering as an investment heading towards 2025. Why? Because you'd be missing out on the fact that almost half of Dell's business revolves around computing servers, sucking up the power of the AI arms race like a thirsty cactus in the desert.

Sure, Dell is famously known for its laptops and workstations. But if you delve deeper, you'll find that its Infrastructure Solutions Group (ISG) is where the magic happens. ISG saw a whopping $11.4 billion in revenue during Q3 of fiscal year 2025 - a 34% year-over-year increase. This growth is no mere blip on the radar; it's a clear indication that Dell is cashing in big on the AI wave.

Investors have started to take notice. Management revealed that their five-quarter AI pipeline, packed with future deals, skyrocketed by 50% compared to the previous year. AI is not just a passing trend for Dell; it's set to be a major driver of its growth over the next few years.

But hold up, cowboy. Not everything is hunky-dory in Dell's world. The client solutions group (CSG), responsible for those trendy laptops and workstations, isn't exactly shining. Revenue in this division slipped by 1% year-over-year to $12.1 billion. While the commercial sector saw a 3% bump, the consumer market took a tumble, shrinking by 18%. It seems Dell's struggling to keep up with the John Does and Jane Does of the consumer tech world.

However, let's not let this dampen our enthusiasm. Dell's revenue overall rose by 10%, with earnings per share (EPS) climbing 16%. While it's not breaking any records, it's a decent performance that still earns Dell a spot amongst the AI investing crowd.

Now, the question on everyone's mind: Is Dell a better investment than established AI companies?

Well, wanderer, you've got to consider a few factors. Dell's cheap stock valuation is one of them. At around 20.5 times earnings, it's less pricey than the average S&P 500 stock. Plus, Dell's financial outlook is solid, with expectations of robust free cash flow generation. This sets the stage for shareholder-friendly capital return programs, sweetening the deal for investors.

But if we're being truly uncensored here, the real potential for growth lies in Dell's AI-optimized servers. It's seeing an increasing demand for these babies from tier-2 cloud providers, AI cloud service providers, and enterprises. This demand is driven by the need for high-performance servers in AI algorithm research and applications development.

Dell's not resting on its laureurs, either. It's aiming to boost its AI game by partnering with rising stars, like xAI, on a $50 billion AI server deal. And with an expanded partner program offering enhanced incentives, Dell wants to be at the forefront of AI adoption.

Now, some might argue that Dell's growth isn't going to break any records. They're probably right. But with solid revenue growth, a modest but respectable dividend, and share repurchases, this stock has the potential to deliver between 10% and 12% annual growth, making it a worthy AI investment option. Just don't expect Dell's stock to suddenly go galactic in terms of growth. It's a steady, reliable, uncensored ride in the world of AI investing.

Despite Dell's strong performance in its AI-focused sectors, the financial situation in their consumer market division is less promising. The client solutions group saw a minor decline in revenue, with a 1% decrease compared to the previous year.

Considering Dell's valuation, the company's stock is relatively affordable, with a valuation of around 20.5 times earnings, which is lower than the average S&P 500 stock.

The potential for growth in Dell lies in its AI-optimized servers, which have seen an increasing demand from tier-2 cloud providers, AI cloud service providers, and enterprises. This demand stems from the necessity of high-performance servers for AI algorithm research and applications development.

Investing in Dell could potentially yield annual growth between 10% and 12%, with the company's solid revenue growth, modest but respectable dividend, and share repurchases. However, it's important to note that Dell's growth may not surpass expectations of extraordinary rates.

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