Dell Technologies (DELL) $120 has a lot to offer.

Industry/Sector/Type - Computer hardware/Servers and Data Center Infrastructure/cyclical

Biggest catalysts for the stock - Increasing percentage of AI revenues with a low valuation, with a strong likelihood of multiples expanding.

I bought some on 01/02/2026 at $128, and plan to add more tomorrow.

Positives

• A fairly large share, 52%, growing from 47% YoY of Dell’s revenues, is now coming from the Infrastructure solutions group led by AI servers and infrastructure equipment.
• More importantly, the AI data center share will continue to grow.
• In Q3 they shipped $5.6Bn worth of AI servers and $15.6Bn year to date, and they still have a backlog of $18.4Bn.
• The cyclical PC business has stabilized, with client solutions revenue increasing 3%. Dell has had 5 consecutive quarters of P&L growth and 7 consecutive quarters of commercial demand growth.
• The valuation is very attractive at just 10.5x earnings growing at 16% in the next three years, and I’m confident that Dell will fetch a higher multiple in 2027

Negatives

• 60% of the business will be low margin and cyclical - Even within the infrastructure group AI business is just growing, and has just passed 15% of the total segment.
• It has significant competition in several of its business segments, including OEMS out of China that compete heavily on price.
• Operating margins are poor at 5.5% as is cash flow generation, and should the AI bubble burst under the weight of over building and a demand slowdown, weaker companies like Dell will take the brunt of it and take a long while to recover.

Investors will need to be very patient with Dell, because even with already low margins, ramping AI servers takes up extra cash and expenses upfront. Still, I believe the improvements are visible and sustainable. 8% revenue and 16% growth is fairly impressive for a $112Bn behemoth in a notoriously difficult industry. In this case the benefits outweigh the risks and I could see Dell crossing $150 in the next 12 months returning 25% in a year. With just a small 9% price increase in the past year, Dell has room to run.

Return

1 Year 9% 5 Year 57% 10 Year - N/A

Valuation

Three years forward.

P/S 0.7 Sales Growth 8% P/S Growth 0.06 - that is extremely low.

P/E 10.53 Earnings Growth 16% PEG 0.67 - again, as a cyclical I don't expect it to be too much higher than 1, but 0.67, analysts are not giving Dell enough credit.

Cash Flow Margin 6%

Operating Margin 5.4%