Buy Dell Technologies or Hewlett Packard Stock for AI Server Growth?

Core Viewpoint - Partnerships with Nvidia for AI server development are attracting investor interest in Dell Technologies and Hewlett Packard Enterprise, despite soft demand for traditional PCs [1][2]. Dell Technologies - Dell's Q3 sales increased by 10% year over year to $24.36 billion, although it fell short of Zacks estimates of $24.56 billion [3]. - The Infrastructure Solutions Group (ISG) segment achieved record sales of $11.4 billion, a 34% increase from the previous year, driven by server and networking revenue of $7.4 billion, which surged by 58% [3]. - Q3 earnings per share (EPS) rose 14% to $2.15, exceeding expectations of $2.06, marking 11 consecutive quarters of surpassing Zacks EPS Consensus with an average earnings surprise of 10.44% [4]. - Dell's Q4 sales guidance of $24-$25 billion is below analyst expectations, attributed to weaker demand for traditional PCs and increased competition, with the current Zacks Consensus at $25.27 billion, indicating a 13% growth [5]. Hewlett Packard Enterprise - HPE is expected to report a 12% increase in Q4 sales to $8.23 billion, up from $7.35 billion in the prior year, with earnings anticipated to rise 6% to $0.55 per share [6]. - HPE's server revenue surged by 35% in its fiscal third quarter to $4.3 billion, contributing to an overall Q3 sales increase of 10% year over year to $7.71 billion, slightly exceeding estimates of $7.66 billion [7]. - HPE has consistently met or exceeded earnings expectations for nine consecutive quarters, with an average EPS surprise of 7.48% in its last four quarterly reports [7]. Stock Performance - Dell's stock has increased by over 60% this year, while HPE shares have risen by 25%, both outperforming broader indexes [9]. - Dell trades at a forward earnings multiple of 15.8X, while HPE trades at 9.9X, compared to Nvidia's 46.2X, suggesting attractive valuations for both companies [11]. - Both companies trade at significant discounts to the S&P 500's forward earnings multiple of 25.3X and below the optimal level of less than 2X sales [13]. Final Thoughts - Despite challenges from weaker PC demand, Dell and HPE are positioned as viable investments for exposure to AI growth, currently holding a Zacks Rank 3 (Hold) [14].