For most of the past five years, Wall Street priced Dell Technologies (NYSE:DELL) like a PC maker with a server-side business. Investors paid about 12 times earnings, the kind of multiple reserved for companies nobody expects to surprise them. That discount is gone. Dell now trades at roughly the same multiple as the rest of the tech sector, and the reason is a $95 billion pile of AI server orders still waiting to ship.
Dell sells the hardware that corporate computing runs on: laptops and desktops for businesses, plus the servers, storage, and networking gear that fill data centers. It makes money by building and shipping that equipment, and increasingly by assembling the racks of AI servers that cloud providers and large enterprises are racing to install. Fueled by that multi-billion-dollar backlog, the stock has climbed firmly into the ranks of the 12 High-Flying Stocks to Invest In. The question is whether Dell has earned its new price tag, or whether investors are paying peak multiples on what could be peak earnings. The answer depends less on the backlog’s size than on how much of it Dell can turn into profit.
Scale Is the Real Moat
Dell’s edge in AI servers isn’t a secret chip or a patent. It’s the ability to source components, build complex systems, and deliver them on schedule to customers who can’t afford delays. That supply chain muscle is hard to copy at Dell’s volume, cementing its status among the 10 Best AI Stocks to Buy in October. The order book backs that up. In the fiscal second quarter of 2027, Dell booked a record $60.9 billion in AI server orders and ended the period with a record $95 billion backlog (orders received but not yet delivered). Customers don’t commit that kind of money to a supplier they doubt.
The Numbers Caught Up
The results show the moat widening, not just holding. Revenue hit a record $47.0 billion in the quarter, up 58%. The Infrastructure Solutions Group, home to the server business, grew 89% to $31.8 billion, while AI-optimized server revenue doubled to $16.4 billion.
The surprise was how far the strength spread. Traditional servers and networking revenue jumped 122%, and storage rose 26%. Even the PC side joined in, with the Client Solutions Group up 20% and commercial revenue reaching a record $13.2 billion. That broad lift puts Dell among the AI infrastructure stocks with a PC cushion, a mix few hardware names share. Management raised its full-year revenue outlook from $167 billion to $192 billion and lifted adjusted (non-GAAP) EPS guidance from $17.90 to $25.50, a projected 148% increase.
Can Thin Margins Carry This?
The strongest objection is that AI servers are a volume game, not a pricing one. Dell assembles systems built around other companies’ expensive chips and memory, so much of the value flows to suppliers. The Infrastructure Solutions Group earned a 15.0% operating margin in the quarter, healthy for hardware but modest next to the chipmakers supplying it. AI spending is also lumpy. If cloud giants pause, a backlog-driven boom could reverse quickly, a risk that also hangs over Super Micro Computer, as Jim Cramer prefers Dell. That concern is real, but the latest quarter softens it. Infrastructure operating income rose 225% to $4.8 billion, outpacing the segment’s 89% revenue growth. Thin margins on a far bigger base still add up to real money.
A Multiple That Moved Fast
At 22.63 times forward earnings, as of October 12, Dell trades well above its 5-year average of 12.01 and just below the sector’s 23.29. In plain terms, investors now pay $22.63 for each dollar of Dell’s expected profit, versus $12.01 on average over the past five years. That re-rating makes sense given the guidance. A business raising its full-year outlook by $25 billion in one quarter isn’t the sleepy PC maker that earned a 12 multiple.
The catch is what comes after the surge. Analysts expect EPS growth of 12.43% in 2028, a sharp slowdown from this year’s projected jump. At a sector-level multiple, the stock is pricing Dell as a steady grower, not a hypergrowth story. That leaves little room if 2028 growth slips, but also little froth if AI demand stays strong longer than expected. You’re essentially paying an average price for a company that, right now, is posting above-average results. That gap is what separates Dell from pricier names riding the same AI wave. Hedge funds have taken notice, with 77 funds holding the stock in the most recent quarter, up from 72 in the prior one. Short interest sits at 4.21% of the float, a relatively limited bet against the shares.
Earned, With Conditions
The evidence suggests Dell’s discount disappeared for good reasons. The backlog is real, profits are growing faster than sales, and strength now extends well beyond AI servers. At roughly the sector’s multiple, the stock looks fairly priced for its near-term growth rather than stretched. The setup suits investors comfortable with hardware cycles who believe AI buildouts have years left to run. A falling backlog, or margins slipping as competition for AI orders heats up, would change that picture quickly.
While we acknowledge the risk and potential of DELL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DELL and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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