Dell: Record Backlogs & Surging AI Server Demand

AI Reinvigorates Dell Technologies

Zacks Rank #2 (Buy) stock Dell Technologies (DELL) is a leading provider of servers, storage, and PCs. Dell is best-known for its desktop computers, laptops, and monitors. However, the company is now taking advantage of the artificial intelligence boom, with nearly 40% of its revenue derived from it. It offers the Dell “AI Factory,” an end-to-end service that combines Dell’s compute, storage, client devices, and networking with open software ecosystems to streamline enterprise AI adoption. Additionally, Dell offers high-performance infrastructure for AI-optimized data center servers. Also, Dell offers clients on-premises setups that enable companies to run autonomous multi-step AI agents locally on high-performance workstations.

Dell AI Server Demand Explodes

Dell AI servers provide the high-performance physical infrastructure required to build, train, fine-tune, and run artificial intelligence models. The company helps clients integrate dense clusters of graphics processing units (GPUs) to handle complex mathematical workloads such as Generative AI and deep learning. Although other companies compete with Dell in this industry, Dell has a large advantage over competitors because it has strategic partnerships with the two dominant AI makers – Advanced Micro Devices (AMD) and NVIDIA (NVDA). AI-optimized server revenue grew a mind-boggling 757% in Q1, and the company has a record backlog. Meanwhile, with big tech CAPEX spending expected to soar, server demand will continue to grow exponentially.

Image Source: Carson Investment Research, Bloomberg

Surging AI Backlog

Dell currently sits on a record backlog of $43 billion. Meanwhile, Wall Street analysts expect that the $300 billion behemoth to grow annual earnings by 66.80% in 2026 and 82.52% in 2027.

Image Source: Zacks Investment Research

Dell: A Reasonable Valuation

Although Dell shares have soared recently, its valuation remains rather cheap. The stock has a P/E ratio of 31.41x. Meanwhile, its PEG ratio (which factors in the consensus long-term growth rate) is actually lower than it was in 2024.

Image Source: Zacks Investment Research

Dell Breaks Out of High, Tight Flag Pattern

Growth investing legend William O’Neil coined the “high tight flag” technical pattern. The pattern is one of the rarest and most powerful patterns and led to monstrous moves in SanDisk (SNDK) in 2026 and Qualcomm (QCOM) in 2000. To spot the pattern, look for the following characteristics.

·       The Pole: The stock must double or more in eight weeks or less. A swift move in such a short period is evidence of overwhelming accumulation.

·       The Flag: The flag requires a pullback between three to five weeks that is no deeper than 25% off the flag pole high. Ideally, trading volume dries up during this period.

Tuesday, DELL Shares broke out of a classic HTF pattern:

Image Source: TradingView

Beyond the pattern itself, DELL has been impressive from a relative strength perspective. While AI-related stocks like Marvell Technologies (MRVL) and SanDisk (SNDK) cratered in July, Dell saw little selling.

Image Source: Zacks Investment Research

Bottom Line

Dell has successfully evolved from a traditional PC manufacturer to an AI powerhouse. Driven by a massive backlog, key partnerships with chipmakers, and exceptionally strong technical tailwinds, the stock offers a rare blend of hyper-growth fundamentals coupled with a reasonable valuation.

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This article originally published on Zacks Investment Research (zacks.com).

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