To The Moon

Dell has been one of the strongest AI-related stocks this year, alongside NVIDIA and Broadcom.

As of September 2, Dell closed at $492.20, gaining 15.8% in a single session and moving close to its 52-week high of $514. The stock has now risen more than 230% year to date.

After such a massive rally, does Dell still have room to run? I don’t think we should judge it simply by how high the share price has gone. The more important questions are: Why has it risen so much, and can future earnings support the current valuation?

1. Dell’s rally is backed by more than just AI hype

Dell’s share-price trend this year has been quite clear. Instead of rising steadily every day, the stock has moved sharply higher each time the company reported earnings.

In February, Dell forecast approximately $50 billion in AI server revenue for FY2027, sending the stock higher. In May, the company raised its outlook again, and the shares surged more than 30% in one day.

Following its latest earnings report, Dell lifted its AI server revenue forecast to $74 billion, and the stock jumped nearly another 16%.

In other words, Dell’s rally has not been driven purely by market excitement. The company has repeatedly beaten expectations and raised its forecasts.

Dell reported FY2027 second-quarter revenue of $46.97 billion, up 58% year over year. Adjusted earnings per share reached $7.04, representing 203% growth and significantly exceeding market expectations.

AI server revenue reached $16.4 billion, up 100% year over year. The company also received $60.9 billion in new AI server orders during the quarter, bringing its backlog to $95 billion.

Put simply, Dell has already secured a huge amount of business that has not yet been fully produced and delivered. A backlog does not automatically become revenue, but it gives investors much better visibility into the company’s growth over the next few quarters.

That is one of the main reasons the market has been willing to assign Dell a higher valuation.

2. Dell is transforming from a PC company into an AI infrastructure company

Dell used to trade at a relatively low valuation because PCs and traditional servers were seen as mature businesses with limited growth and relatively thin margins.

That investment story is now changing.

Building an AI data center requires much more than NVIDIA GPUs. Customers also need server racks, networking equipment, storage systems, cooling solutions, software and ongoing services.

Dell’s role is to combine all these components into complete AI systems that customers can actually deploy and use.

NVIDIA provides the core “engine,” while Dell turns that engine into a working server system. That is how Dell can still benefit from the AI boom even though it does not manufacture GPUs itself.

Dell’s Infrastructure Solutions Group generated $31.78 billion in revenue this quarter, up 89% year over year. Within the segment, servers and networking revenue grew 122%, while storage revenue increased 26%.

This suggests that AI demand is spreading beyond AI servers and driving growth across Dell’s networking and storage businesses as well.

Even more importantly, the segment’s operating margin improved from 8.8% a year ago to 15%, while operating profit increased 225%.

One of the market’s biggest concerns was that Dell might simply be assembling expensive AI servers while earning very little profit. The latest results suggest otherwise. As order volumes increase and the product mix improves, Dell is delivering strong growth in both revenue and profit.

The company has raised its FY2027 full-year revenue forecast from $167 billion to $192 billion. It also lifted its adjusted earnings-per-share guidance from $17.90 to $25.50.

In roughly half a year, Dell’s expected AI server revenue has increased from $50 billion to $74 billion. That is the real reason behind the stock’s continued rally.

3. The fundamentals are strong, but chasing the stock still carries risks

Based on a share price of around $492 and Dell’s adjusted FY2027 earnings guidance of $25.50 per share, the stock is trading at approximately 19 times forward earnings.

On the surface, that valuation does not look extremely expensive.

However, it depends on several important assumptions: Dell must successfully deliver its $95 billion backlog, AI server revenue must reach $74 billion, and profit margins must not decline significantly.

The first risk is a slowdown in AI spending.

Some of Dell’s orders come from major cloud providers and AI infrastructure companies. These customers are spending aggressively at the moment, but some also depend heavily on external financing. If AI capital expenditure starts to cool, new orders could decline quickly.

The second risk is the supply chain.

Dell’s AI servers rely heavily on NVIDIA GPUs, as well as large quantities of memory, storage and networking components. Supply shortages, rising component costs or delivery delays could all put pressure on Dell’s growth and margins.

The third risk is that the share price has already risen too quickly.

Dell is now trading close to its 52-week high after gaining more than 230% this year. This suggests that the market has already priced in a great deal of optimism. Even if the next earnings report is solid, the stock could still experience sharp volatility if order growth slows even slightly.

My view is that Dell’s long-term AI story remains intact, but at the current price, it may be better to wait for further earnings confirmation rather than buying heavily after a sharp rally.

For existing shareholders, there are three key indicators to watch: whether AI server orders continue to grow, whether the $95 billion backlog successfully converts into revenue, and whether the Infrastructure Solutions Group can maintain its 15% operating margin.

For investors who do not yet own the stock, buying gradually or waiting for a market pullback may be more sensible than chasing a large one-day gain.

Dell is no longer simply the traditional PC company many investors remember. However, whether the stock can keep rising will ultimately depend on the company’s ability to convert orders into revenue and revenue into sustainable profits.

$Dell Technologies(DELL)$ $NVIDIA(NVDA)$ $Super Micro Computer(SMCI)$

The views above are for informational purposes only and do not constitute investment advice.