We recently compiled a list of the 10 Best Cheap Technology Stocks To Buy According to Analysts. In this article, we are going to take a look at where Dell Technologies Inc. (NYSE:DELL) stands against the other cheap technology stocks.
Doug Clinton, the founder and CEO of Intelligent Alpha, joined a discussion on CNBC’s ‘Squawk Box’ on February 12 regarding the state of the tech sector, AI tech race, how heavy AI investments and tariff uncertainty have affected mega-cap tech stocks over the past month. When asked to rate how bad it has been on a scale of 1 to 10, Clinton replied that about 2.5 weeks ago, during what he called “Deep Tech Monday,” it was probably around an 8.5 or 9 due to significant pressure. However, since then, things have calmed down following the earnings reports from hyperscalers like Google and statements from industry leaders such as Sam Altman indicating that the capital expenditure boom in AI will continue.
Clinton emphasized that while they remain bullish on tech overall, not all companies are equally leveraged to AI. For instance, Meta is highly exposed due to its leadership in open-source AI with models like Llama. Google and NVIDIA are also heavily tied to AI advancements. On the other hand, Amazon and Apple might have less exposure compared to other hyperscalers. Interestingly, the iPhone maker recently made a deal with Alibaba to integrate their AI models onto iPhones in China. Regarding tariffs and trade tensions with China, Clinton suggested that while these issues should be monitored for hyperscalers who have significant chip production exposure, he does not believe they will be overly impacted by tariffs due to their limited involvement in import/export activities directly affected by tariffs. Instead of focusing heavily on tariff risks at this point, he believes it’s more important for investors to track how well these companies’ AI products evolve and how customers adopt them.
He also expressed skepticism about a protracted trade war with China under Trump’s negotiation tactics. He noted similarities with recent negotiations involving Canada and Mexico where border policies were adjusted without prolonged conflict over tariffs. While acknowledging potential impacts if tensions escalate significantly, particularly affecting chip producers, Clinton does not foresee this as an immediate concern within the next year. If China were involved in a protracted trade war with the US, it could be very bad for some companies. However, Clinton doesn’t think this scenario is likely because Trump often seeks quick negotiating wins rather than prolonged conflicts.
Methodology
We used a stock screener to compile a list of tech stocks with a forward P/E ratio of under 15. We then selected 10 stocks that had high average upside potential (over 30%) and were the most popular among elite hedge funds. The stocks are ranked in ascending order of their average upside potential. We’ve also added the hedge fund sentiment for each stock which was sourced from Insider Monkey’s database.
Note: All data is sourced as of February 13.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of IT experts discussing the latest network security trends over a laptop screen.
Dell Technologies Inc. (NYSE:DELL)
Forward P/E Ratio: 12.15
Average Upside Potential: 37.27%
Number of Hedge Fund Holders: 60
Dell Technologies Inc. (NYSE:DELL) provides integrated technology solutions globally and operates through its ISG (Infrastructure Solutions Group) and CSG (Client Solutions Group) segments. ISG offers enterprise-grade storage, servers (including AI-optimized), and networking solutions. CSG provides desktops, workstations, notebooks, and related peripherals. It also offers cybersecurity solutions, financing, and VMware reselling, serving enterprises, public institutions, and SMBs.
Citi analyst Asiya Merchant maintained a Buy rating on Dell Technologies Inc. (NYSE:DELL) with a $156 price target on February 12. Merchant’s optimism stems from improving demand, positive industry event trends, and expected higher AI server margins. The company saw a shift in AI server demand towards Nvidia’s Blackwell architecture in Q3, which impacted short-term shipments as these new products ramped up. Despite this, Dell Technologies Inc. (NYSE:DELL) secured $3.6 billion in AI server orders, which is an 11% sequential increase, and signed 2,000+ enterprise customers for its AI solutions.
It’s also expanding its partnership with CoreWeave, delivering the first Dell PowerEdge XE9712 server racks with NVIDIA GB200 NVL72 to enhance CoreWeave’s AI cloud platform. This collaboration will utilize the company’s liquid-cooled IR7000 racks and AI professional services to optimize CoreWeave’s data center design, combining Dell Technologies Inc.’s (NYSE:DELL) infrastructure with NVIDIA’s technology.
Despite disappointing earnings in H1 2024, the Carillon Scout Mid Cap Fund views the company positively due to its potential for AI-driven growth and strong product offerings. The fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its Q2 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) was a top contributor despite reporting disappointing first-quarter earnings results, because investors looked through the near-term disappointment and expected strong growth from AI-related servers and personal computers. We expect Dell to participate in the growth of artificial intelligence hardware, especially as enterprises invest more aggressively. We like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
Overall DELL ranks 7th on our list of the best cheap technology stocks to buy according to analysts. While we acknowledge the potential of DELL as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DELL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.