Dell Technologies Inc. (NYSE: DELL) is experiencing significant momentum in its AI server business, prompting Morgan Stanley to raise its price target for the stock to $113.00 from $110.00. Despite this upward revision, the investment firm has chosen to maintain an “Underweight” rating on Dell’s shares, citing ongoing challenges in the market.
Morgan Stanley analysts noted that the strength of Dell’s AI server segment is remarkable, accounting for over 100% of the company’s positive revenue guidance for the fourth quarter. This segment is also expected to contribute substantially to earnings per share (EPS) compared to previous estimates and consensus figures. AI server orders have surged by more than 150%, leading to total orders of $30 billion in fiscal 2026.
Looking ahead, analysts anticipate that this momentum will persist into fiscal 2027, projecting a 50% increase in AI server revenue, which could reach $37 billion. This growth trajectory highlights the increasing demand for AI-related technology solutions amid rising interest in artificial intelligence applications across various sectors.
Challenges remain, however, as Dell must navigate the current memory supercycle, which has resulted in price spikes and supply chain issues. According to Morgan Stanley, “AI servers are no longer the core of the debate on DELL – the impact of memory price inflation/supply shortages on demand and margins in FY27 (CY26) is.” The firm emphasized that Dell has recognized the unprecedented nature of this memory supercycle, acknowledging that rising costs will affect all product categories.
Dell Technologies Inc. provides a range of IT solutions, including servers, storage, networking, and personal computing devices, serving both businesses and consumers globally. While there is potential for growth, Morgan Stanley asserts that other AI stocks may offer greater opportunities for returns in a shorter timeframe.
As investors consider their options in the AI sector, it is crucial to weigh the potential risks and rewards associated with Dell Technologies. The company’s strong performance in the AI server market is promising, yet external factors such as memory prices and supply chain constraints could impact future profitability.
In conclusion, while Dell Technologies continues to be a significant player within the AI landscape, the broader context of market dynamics and competition will influence its investment appeal.
