Dell Technologies Stock Surges 23% Year to Date: How to Play

Core Insights - Dell Technologies (DELL) shares have increased by 23% year to date, outperforming the broader Zacks Computer and Technology sector's growth of 14.6% and the Zacks Computer - Micro Computers industry's decline of 7.6% [1][10] - The growth is primarily driven by strong demand for AI-related products and an expanding partner network [2][9] Financial Performance - In Q1 FY26, Dell reported record orders of $12.1 billion and a backlog of $14.4 billion, indicating robust demand for AI products [3] - Projected revenues for Q2 FY26 are expected to be between $28.5 billion and $29.5 billion, suggesting a year-over-year growth of 16% [12] - Non-GAAP earnings are anticipated to be $2.25 per share, indicating a 15% growth at the mid-point [13] AI Business Growth - Dell is experiencing significant growth in its AI-related business, particularly in AI servers, driven by digital transformation and interest in generative AI applications [2] - The company has introduced updates to its AI Data Platform, enhancing capabilities for managing AI workflows [6] - New server offerings, including PowerEdge R7725 and R770 featuring NVIDIA RTX PRO 6000 GPUs, are designed to accelerate AI workloads [8] Partner Network Expansion - Dell's expanding partner base includes notable companies such as Lowe's, NVIDIA, Microsoft, and Meta Platforms, contributing to its growth [9][11] - The partnership with Lowe's aims to enhance customer experiences through advanced AI and PC technology [11] Competitive Landscape - Despite its growth, Dell faces stiff competition in the server market from companies like Hewlett-Packard and Super Micro Computers [17] - Hewlett-Packard's server business has seen a 6% year-over-year growth, reaching $4.06 billion, driven by demand for AI-optimized servers [18] Valuation Metrics - Dell shares are considered undervalued, with a forward 12-month price-to-sales ratio of 0.89 compared to the sector average of 6.83 [14]