Dell Technologies stock could have more room to run -- even after this year's meteoric rise -- as artificial intelligence hardware demand remains resilient.
Wells Fargo analyst Aaron Rakers raised his price target on Dell to $545 from $505 on Friday, which implies a 10% increase from the stock's last closing price of $494.51. He also maintained an Overweight rating on the shares.
Dell's "server results and outlook present continued upside," Rakers wrote in a research note. That's because AI server demand continues to surge and the total addressable market is high, despite the rise in costs for components in these servers, like memory, he said.
Dell is a massive hardware company that makes products like computer systems and technology infrastructure, including AI servers. The AI infrastructure part of the business has been extremely important for Dell as demand for the hardware needed to power the technology surges.
This demand led to Dell to report fiscal first-quarter revenue of $43.8 billion on May 28, an 88% jump from a year earlier. The stock has soared 291% this year and 256% over the past 12 months.
Dell is expected to report fiscal second-quarter financial results on Sept. 3. Analysts surveyed by FactSet project revenue of $44.9 billion, a 51% increase from the previous year.
As costs for components rise and investor skepticism over hefty AI capital expenditures persists, there's an overarching concern on Wall Street that the spending on AI infrastructure isn't sustainable.
However, Super Micro Computer posted better-than-expected fiscal fourth-quarter earnings after the stock market closed on Tuesday. The server maker also gave a positive outlook for the full fiscal year, citing continued strong demand. Cisco Systems then reported solid financials and guidance on Wednesday night, with its results also boosted by customers' needs for AI hardware.
The strong results from fellow AI hardware companies this week prove that a potential spending slowdown hasn't happened yet. That's a good sign for Dell, and could support more upside for a stock that's already been on a tear.
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