Shares of Dell Technologies have fallen 47% from their peak of $179.70, raising concerns among investors.
Despite this sharp decline, the company’s fundamentals remain intact, with earnings growing at a compound annual growth rate (CAGR) of 10% since fiscal 2021.
While the stock has lost substantial value, Dell is benefiting from rising demand for artificial intelligence (AI) computing solutions.
A strong AI order backlog and increasing enterprise adoption of AI-driven infrastructure suggest that the company’s long-term growth prospects remain robust.
In this context, evaluating Dell’s future growth potential and valuation could provide insight into whether its current stock price represents an undervalued opportunity.
AI-driven growth bolsters Dell’s future prospects
Dell’s AI segment has emerged as a key driver of growth, supported by strong demand and strategic partnerships.
In the fourth quarter of fiscal 2025, AI-related orders surged to $1.7 billion, with shipments reaching $2.1 billion and a substantial backlog of $4.1 billion.
This momentum carried into fiscal 2026, with Dell expanding its AI footprint through partnerships with xAI and other enterprise clients in February 2025.
As a result, its AI backlog has nearly doubled to $9 billion, reflecting sustained demand and long-term revenue visibility.
Since launching its high-performance XE9680 system, Dell has seen consistent growth in AI-related orders each quarter.
Increasing enterprise adoption of AI-driven solutions, along with Dell’s energy-efficient infrastructure and financing options, is further strengthening its competitive position in the AI market.
Strength in servers and storage solutions
Beyond AI, Dell continues to perform well in its traditional server and storage businesses.
The company has capitalized on growing enterprise demand for high-performance servers as businesses upgrade their data centers with advanced processing power and memory.
In storage solutions, Dell’s midrange PowerStore product remains a strong performer, while its PowerScale and PowerFlex systems are gaining traction.
These segments contribute to Dell’s profitability and provide a stable foundation for future expansion.
Rebound in PC business and AI-powered computing
Dell’s Client Solutions Group (CSG), which includes its PC division, is showing signs of recovery.
The small and medium-sized business (SMB) segment has rebounded, with commercial revenue posting two consecutive quarters of growth.
The increasing adoption of AI-powered PCs is expected to drive further demand, as businesses seek more powerful and efficient computing solutions.
This trend could help Dell regain lost ground in the PC market, potentially boosting sales in the coming quarters.
Is Dell stock currently undervalued?
Despite its strong financials and AI-driven growth potential, Dell appears significantly undervalued compared to industry peers.
The stock is trading at a forward price-to-earnings (P/E) ratio of 11.68x and a price-to-sales (P/S) multiple of 0.72x—levels that suggest room for upside.
Looking ahead, Dell projects revenue of $101 billion to $105 billion for fiscal 2026, with the midpoint reflecting an 8% year-over-year increase.
The Infrastructure Solutions Group (ISG) is expected to grow in the high teens, driven by $15 billion in AI server shipments and strong demand for traditional computing solutions.
Meanwhile, adjusted earnings per share (EPS) are forecast to reach $9.30 (plus or minus $0.25), representing a 14% increase at the midpoint.
A strong investment opportunity?
With AI adoption accelerating across industries, Dell is well-positioned to capitalize on this technological shift.
Its strong presence in AI computing, servers, and storage solutions, combined with an expanding order backlog, points to sustained growth.
Moreover, as Dell continues to generate solid revenue and earnings growth, it could reduce its debt burden, increase share buybacks, and enhance shareholder value.
Given its attractive valuation and strong market positioning, Wall Street analysts remain optimistic, maintaining a “Strong Buy” consensus on Dell stock.
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