Barclays Calls This 1 AI Server Stock ‘Best in Class’ Amid Upgrade to ‘Overweight’ Rating

Core Viewpoint - Barclays upgraded Dell Technologies (DELL) to an "Overweight" rating, highlighting its strong position in AI server infrastructure and operational discipline as it meets rising demand for AI hardware [1] Group 1: AI Server Market - Analyst Tim Long maintained a $148 price target for DELL stock, expressing confidence in Dell's ability to balance rapid AI revenue growth with margin stability [2] - Dell is set to ship approximately $9.4 billion worth of AI servers in Q4, leading to an estimated full-year AI server revenue of around $25 billion [2] - AI server orders reached an all-time high of $12.3 billion in Q3, with year-to-date bookings at $30 billion and a backlog of $18.4 billion [7] - The AI server business has shown remarkable growth, with shipments increasing from $1.5 billion two years ago to $10 billion last year [7] Group 2: Financial Performance - Dell reported record revenue of $27 billion and adjusted earnings per share of $2.59 in Q3 of 2025, driven by AI server infrastructure [6] - Despite concerns about AI servers compressing gross margins, Dell has maintained mid-single-digit operating margins in this segment, indicating pricing power and operational efficiency [3] Group 3: Broader Market Position - Beyond AI, Dell is expanding its position in the recovering enterprise server and storage markets, increasing the mix of proprietary intellectual property in its storage offerings [4] - Dell is well-positioned to benefit from a substantial installed base of customers with older-generation servers, presenting significant upgrade potential [4] - Dell's supply chain leadership is noted as a key advantage in navigating rising commodity costs, particularly as memory prices continue to rise [5]