Dell Shares Jump 10% on RBC AI Outlook
Dell Shares Jump 10% on RBC AI Outlook
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Key Points
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RBC analyst David Paige said Dell’s “best-in-class supply chain” is a competitive moat, with customers increasingly relying on the company as a “calming hand” during periods of supply volatility and component shortages.
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Dell’s valuation has become more demanding: at about $558.56 per share, the stock was trading at roughly 21.9 times its projected fiscal 2027 non-GAAP earnings and 22.9 times projected GAAP earnings; at RBC’s $640 target, those multiples would rise to approximately 25.1 and 26.3, respectively.
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Dell is scheduled to join the S&P 100 before trading opens Sept. 21, which could generate temporary buying from index-tracking funds, although the inclusion does not itself improve the company’s earnings outlook.
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RBC said agentic AI could increase demand for conventional CPU-based servers because companies need additional computing capacity for orchestration layers, expanding the market beyond GPU-heavy AI systems.
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Dell’s second-quarter AI-server orders reached $60.9 billion, while GAAP diluted earnings rose 273% year over year to $6.34 per share. The rally also followed a prior-day decline tied to Dell’s planned $5 billion bond offering and Silver Lake’s sale of nearly $25 million in Dell shares; the bond deal nevertheless attracted about $23 billion in peak orders.
Dell Technologies shares jumped about 10% Friday after RBC Capital Markets started coverage with an Outperform rating and a $640 price target. RBC said Dell is positioned to win big from a multiyear AI-infrastructure spending surge, pointing to a $95 billion server backlog and $16.4 billion in recent AI-server revenue as proof of surging demand.
The stock rally came after Dell reported strong quarterly results: 58% revenue growth to $47 billion and a raised full-year revenue outlook of $192 billion. RBC highlighted Dell's access to Nvidia GPU systems, including Grace Blackwell racks, and a storage business that grew 26% as companies stockpile capacity for AI-generated data.
Why RBC Sees Dell as the AI Infrastructure Winner
RBC analyst David Paige said Dell's "best-in-class supply chain" is a competitive advantage. Customers increasingly view Dell as a "calming hand" during supply shortages and component crises. The firm believes Dell offers a broad, one-stop infrastructure platform—servers, storage, and networking—that rivals struggle to match.
Dell's storage business is a key unlock. A 26% jump in storage revenue signals that companies are preparing massive data pipelines for AI workloads. This diversification beyond pure GPU-focused systems gives Dell multiple growth vectors and reduces reliance on Nvidia GPU availability alone.
AI Server Backlog Reaches $95 Billion
Dell's second-quarter AI-server orders hit $60.9 billion, feeding a backlog that now stands at $95 billion. This massive queue reflects pent-up demand from cloud giants and enterprises racing to build AI capacity. However, converting that backlog into revenue requires flawless execution and stable supply chains.
RBC noted that agentic AI—where systems make autonomous decisions—could boost demand for traditional CPU-based servers. Companies need extra computing power for orchestration layers that manage AI agents. This expands the market beyond GPU-heavy systems and plays to Dell's strengths in broad infrastructure.
Valuation Now Leaves Little Room for Error
Dell's stock trades at roughly 21.9 times projected fiscal 2027 non-GAAP earnings—a demanding multiple. RBC's $640 price target would push that to 25.1 times. At those levels, any miss on backlog conversion, memory supply delays, or demand softness could trigger a sharp pullback.
Dell is joining the S&P 100 on September 21, which may spark temporary buying from index funds. However, the index inclusion doesn't improve earnings—it just reshuffles portfolio holdings. Investors should watch execution metrics: backlog burn rate, gross margins, and memory chip availability.
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