To The Moon

$Dell Technologies Inc.(DELL)$ has been a key player in the tech industry for decades, and its recent focus on AI infrastructure places it in a promising position for the future. While its Q3 earnings report disappointed the market, leading to a sharp after-hours drop, I see this as a potential opportunity to start building a position. Here's why I believe Dell's long-term AI narrative remains intact, and why the current price levels are attractive for accumulation.

Earnings Recap: Strong Growth in AI, Weak Guidance Weighs on Sentiment

Dell's Q3 results showed clear strength in its AI-driven segments, but cautious guidance overshadowed the positives:

• Earnings per Share (EPS): Adjusted EPS came in at $2.15, beating estimates of $2.06.

• Revenue: $24.4 billion, missing the consensus of $24.67 billion. While revenue grew 10% year-over-year, the slight miss reflects softer-than-expected demand in some segments.

• Guidance: For Q4, Dell forecasts revenue between $24 billion and $25 billion, below Wall Street’s expectation of $25.57 billion. EPS guidance of $2.50 also came in below the $2.65 expected.

Despite the mixed results, Dell’s AI narrative remains compelling, particularly given its position as a major vendor of AI server systems.

AI Growth

The most promising part of Dell’s business lies in its Infrastructure Solutions Group (ISG), which includes AI servers, storage, and networking components. This segment is where I see long-term potential:

1. AI Server Sales Surging: Revenue from AI systems rose 58% year-over-year to $7.4 billion, with $2.9 billion in shipments this quarter alone. Customers booked an additional $3.6 billion in future AI server orders, reflecting strong ongoing demand.

2. Blackwell AI Chips Pipeline: Some orders are being deferred as customers wait for Nvidia’s next-generation Blackwell AI chips, which Dell integrates into its systems. This delay is temporary, and I believe it underscores the pent-up demand for cutting-edge AI infrastructure.

3. Enterprise AI Adoption in Early Stages: COO Jeff Clark emphasized that enterprises are only beginning to deploy AI. With a $4.5 billion pipeline of future AI orders, Dell is well-positioned to benefit from this growing trend.

While Dell's reliance on $NVIDIA Corp(NVDA)$’s AI accelerators ties its growth to Nvidia’s roadmap, it also positions Dell as a critical player in the AI ecosystem.

Why the Current Price is Attractive

DELL Hourly Chart

After the earnings report, Dell’s stock dropped 10% in after-hours trading, landing in the $125–$126 range. For me, this puts the stock in a buy zone. Historically, Dell has traded between $118 and $131, and I see this as a solid range to start accumulating shares.

• Valuation: At these levels, Dell offers exposure to the AI narrative at a more reasonable valuation compared to pure-play AI stocks like Nvidia, which have much higher multiples.

• AI Growth Narrative: I strongly believe AI will remain a dominant theme for 2025 and beyond. Dell's positioning as a major vendor of AI infrastructure gives it exposure to this megatrend.

• No Quick Recovery Expected: I don’t anticipate a rapid V-shaped recovery in the stock price, which is why I’m more inclined to buy shares rather than trade options. This approach aligns with my view that Dell is a long-term play on AI infrastructure, and I’m willing to hold through the volatility.

Plan to Dollar-Cost Average (DCA)

Given the current uncertainty in the market, I’m planning to DCA into Dell over the next several weeks or months, particularly if the stock drops closer to $118. Here’s my approach:

1. Initial Buy Zone: $125–$126, where the stock currently trades post-earnings.

2. Further Buys: Incremental purchases if the stock dips closer to $118.

3. Hold Period: I’m prepared to hold the stock for at least 6–12 months, as I expect the AI-driven growth to play out over time.

Risks to Consider

While I’m optimistic about Dell’s long-term prospects, there are risks to keep in mind:

• Dependence on Nvidia Chips: Delays in Nvidia’s Blackwell chip availability could push AI revenue growth further into the future.

• Consumer PC Weakness: Dell’s Client Solutions Group, which includes PC sales, declined 1% year-over-year. This segment may continue to drag on overall results if consumer spending remains weak.

• Competition: Dell faces stiff competition from other AI infrastructure vendors like $Hewlett Packard Enterprise(HPE)$ and $SUPER MICRO COMPUTER INC(SMCI)$, as well as Asian manufacturers.

Conclusion

$Dell Technologies Inc.(DELL)$’s Q3 earnings highlighted the company’s growing strength in AI infrastructure, even as near-term guidance disappointed. I believe the current price drop creates an opportunity to accumulate shares at a reasonable valuation.

With AI adoption still in its early stages and Dell already demonstrating robust growth in this segment, I see the company as a strong long-term play in the AI ecosystem. My plan is to DCA into the stock and patiently hold as the AI narrative unfolds in 2024 and beyond.

What do you think about Dell’s AI potential?

Are you buying the dip, or do you see better opportunities elsewhere in the AI space?

Let’s discuss!

@MillionaireTiger @Tiger_comments @Tiger_SG @TigerEvents @TigerClub @Daily_Discussion @CaptainTiger

Disclaimer: This is a general analysis and not financial advice. Always conduct your own research before making any investment decisions.