Dell Just Scored Deeper Nvidia Ties. Should You Buy DELL Stock Now?

Globe and Mail

23-05-2025

Dell (DELL) has underperformed its tech peers over the past year, despite its investments in artificial intelligence and performance of its AI server business. Shares are down nearly 30% over the past 52 weeks, while Nvidia (NVDA) is up nearly 30%.
However, its latest announcement to join forces with powerhouse Nvidia could change that.
The company announced that it would partner with Nvidia to unveil its latest Dell AI Factory. CEO Michael Dell said 'Our job is to make AI more accessible. With the Dell AI Factory with NVIDIA, enterprises can manage the entire AI lifecycle across use cases, from training to deployment, at any scale.'
This latest announcement reflects a 'deepening' of its collaboration with Nvidia.
Is this enough for investors to make Dell stock a part of their portfolios?
Dell Is Down for the Year (Albeit Modestly)
On a 5-year basis, DELL stock has rallied more than 350% as Covid-induced lockdowns led to soaring demand for its products.
However, in the recent past, the share price performance has been lackluster. The stock is down more than 3% in the year-to-date and close to 30% over the past 52 weeks.
Mixed Q4 (With Some Worrying Signs)
Dell's numbers for the latest quarter were a mixed bag, with earnings surpassing Street expectations but revenues missing. The company reported total net revenues of $23.9 billion, up 7% from the previous year. Yet, it missed the consensus estimate of $24.57 billion.
Earnings surged by 30% on a year-over-year basis to $2.68 per share, exceeding expectations of $2.52 per share. Notably, this marked the ninth consecutive quarter of earnings beats from the company.
Cash flow from operations for the quarter came in at $585 million, 68% lower than the previous year's figure of $1.5 billion. Dell ended the quarter with a cash balance of $3.6 billion, lower than its short-term debt levels of $5.2 billion.
In terms of guidance, Dell expects revenue to be between $101 billion and $105 billion, up 8% year over year at the midpoint of $103 billion. For Q1, the company expects revenue of between $22.5 billion and $23.5 billion, up 3% year over year at the midpoint of $23 billion.
Encouraging Drivers
Enthusiasm surrounding the company is largely fueled by the strength and momentum of its forward-looking strategies.
To begin with, Dell's AI server business continues to impress, underpinned by a $9 billion backlog and a rapidly expanding deal pipeline. These figures strongly suggest that the company is well on track to surpass its projected $15 billion shipment floor in its fiscal 2026. Since the debut of the flagship 9680 platform, this backlog has been growing every quarter, fueled by rising interest from both cloud service providers and enterprise clients.
Another powerful tailwind is the expected replacement cycle tied to the end of Windows 10 support, scheduled for October 2025. This event is likely to unlock a wave of deferred commercial PC upgrades, and Dell is positioned to be a primary beneficiary. The company's Client Solutions Group has already posted three straight quarters of rising commercial demand, and signs point to further acceleration as businesses prepare to modernize their aging systems. With next-generation AI PCs entering the market and Dell holding the top spot in commercial AI PC share, the company is well-placed to capture a disproportionate portion of this pent-up refresh demand in the first half of next year.
Further, Dell's strategic relationship with Nvidia is another key differentiator. The collaboration involves integrating Nvidia's most advanced GPUs into Dell's PowerEdge server lineup. This partnership gives Dell a competitive edge in supplying AI-optimized infrastructure tailored for training, inference, and large-scale data applications. As Nvidia continues to see overwhelming demand for its chips, Dell remains a key partner riding the broader wave of AI-driven computing needs.
Meanwhile, Dell's Infrastructure Solutions Group (ISG) also continues to be a critical growth lever. Current projections suggest Dell's AI server shipments could climb to $15 billion in the current fiscal year, up from $10 billion the year before.
From a valuation standpoint, Dell appears attractively priced relative to its peers. The stock trades at a forward price-earnings ratio of 14.2x, a price-sales ratio of 0.82x, and a price-cashflow of 14.4x — all of which are well below the sector averages. These discounted multiples, combined with Dell's strategic execution and exposure to structural growth trends, present a compelling narrative for long-term investors.
Analyst Opinions on DELL Stock
Keeping these factors in mind, analysts have deemed DELL stock a 'Strong Buy' with a mean target price of $130.72. This indicates upside potential of about 17% from current levels. Out of 20 analysts covering the stock, 15 have a 'Strong Buy' rating, two have a 'Moderate Buy' rating, and three have a 'Hold' rating.