Dell Technologies Inc. (NYSE: DELL) is attracting attention in the technology sector, particularly due to its significant momentum in the AI server market. On November 26, 2023, Morgan Stanley raised its price target for Dell stock to $113.00 from $110.00, while maintaining an “Underweight” rating. Despite the positive outlook, analysts at Morgan Stanley remain cautious about the stock’s potential.
The firm’s analysts highlighted that Dell’s AI server business has exceeded expectations, contributing to more than 100% of the company’s fourth-quarter revenue guidance upside. Additionally, this segment has played a crucial role in boosting earnings per share (EPS) projections compared to both analyst estimates and consensus figures. Orders for AI servers have surged by over 150% during fiscal 2026, amounting to approximately $30 billion in orders this year alone.
Looking ahead, analysts expect this momentum to persist into fiscal 2027, projecting a further 50% increase in AI server revenue, which could reach around $37 billion. Despite these positive developments, the company faces challenges related to the ongoing memory supercycle, characterized by price spikes and supply chain issues.
Memory Challenges and Market Position
Morgan Stanley emphasized that the current discourse surrounding Dell is shifting from its AI server capabilities to the implications of memory price inflation and supply shortages on overall demand and profit margins in fiscal 2027. The firm noted, “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 acknowledged that Dell has realistically assessed the challenges posed by this unprecedented memory supercycle, which is expected to increase costs across all product categories.
Dell Technologies Inc. provides a wide range of IT solutions, including servers, storage, networking, and personal computing devices, catering to both businesses and consumers globally. While there are inherent risks associated with investing in Dell, Morgan Stanley’s analysts believe that other AI stocks may offer more attractive returns within a shorter time frame.
Investors seeking alternatives in the AI sector might consider exploring stocks with promising potential as highlighted in various market analyses. The landscape of AI investments remains dynamic, with numerous options available for those looking to capitalize on the technology’s rapid growth.
As Dell navigates these complex market dynamics, stakeholders will be keenly observing how the company adapts to the challenges posed by the memory supercycle while leveraging its strengths in the AI server market.
