The S&P500 is the most followed stock market benchmark in the US, consisting of the 500 largest companies in the country. Given the size of the companies that comprise it, it is considered the most reliable measure of the overall performance of the stock market. To qualify for membership in the S&P 500, companies must meet the following requirements:
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Be a US-based company.
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Have a market capitalization of at least $8.2 billion.
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Must be very liquid.
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Must have at least 50% of outstanding shares available for trading.
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Must be profitable under GAAP in the most recent quarter.
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Must be profitable in total for the previous four quarters,
Dell Technologies (NYSE: DELL) just became one of the newest additions to the S&P 500, joining its ranks on September 23, one of only 11 companies added to the index so far this year. Since the start of 2023, Dell shares have risen 193% as rapid adoption of generative AI has caused investors to take a fresh look at the company’s hardware and IT services solutions. Dell’s performance has become even clearer over the past decade: Dell’s revenue has increased by 104%, net income has increased by 1,440%, and its stock price has increased (at the time of writing) by 879%.
Despite the incredible run, some on Wall Street believe there is much more to come. Let’s take a look at the opportunities ahead and why Dell stock is a buy.
Stepping into battle
Dell is a household name and has been providing computers and IT solutions for more than forty years – and quickly saw the opportunities that AI offered. Earlier this year, Dell unveiled the Dell AI Factory – powered by Nvidia‘s gold standard AI chips. The AI ​​Factory is a set of products, services and solutions optimized and tailored for AI workloads. Dell not only has hardware designed to meet the rigors of AI, but can also help companies of all sizes accelerate AI adoption.
Dell also works with Microsoft and introduced an extensive portfolio of Copilot+ AI-powered PCs, workstations, laptops and notebooks. This gives the company yet another way to benefit from the continued adoption of AI.
The evidence is clear
The impact of the AI ​​revolution is starting to become visible in Dell’s results. During the second quarter of fiscal 2025 ended August 2, net sales rose 9% year over year to $25 billion, while diluted earnings per share (EPS) of $1.17 rose 86%.
Dell’s infrastructure solutions group – which includes servers and networking equipment – ​​posted record revenues that grew 38% to $11.6 billion, driven by rising demand for servers with the computing power to handle AI. This was partially offset by tepid results from the company’s customer solutions group – which also includes consumer PCs and commercial workstations – which fell 4% year over year to $12.4 billion due to weak PC demand.
Management has boosted its full-year guidance and now expects revenue of $97 billion at the midpoint of its expectations, representing year-over-year growth of about 10%.
Moreover, Dell’s future looks bright. Many PCs purchased during the pandemic are nearing the end of their lifespan. The resulting pent-up demand, combined with the introduction of AI-enabled PCs, is expected to drive growth in the coming years.
Global PC shipments have finally turned positive this year, rising about 2% year-over-year in the first quarter and 3% in the second quarter, according to data collected by market research firm International Data Corporation. This comes after eight consecutive quarters of annualized contraction. According to research firm Canalys, the PC market is expected to grow by 5% in 2024 and 8% in 2025. As one of the largest PC suppliers in the world, Dell will undoubtedly benefit from this recovery.
Furthermore, the AI ​​revolution is only just beginning to take shape, and the opportunities ahead are enormous. The global AI market was valued at $2.4 trillion in 2023 and is expected to rise to $30.1 trillion by 2032, a compound annual growth rate of 32%, according to Expert Market Research.
Given the size of this opportunity and Dell’s location at the intersection of consumer and business computing, the company is well positioned to benefit from the accelerated adoption of AI.
The future is bright
Don’t take my word for it. Of the 21 Wall Street analysts who covered Dell’s stock in August, 81% rated it a buy or strong buy. no recommended sale. Moreover, on the eve of his entry into the S&P 500, TD Cowen analyst Krish Sankar raised his price target to a Street high of $218. That represents a potential upside of 85%, compared to Monday’s closing price.
While the analyst acknowledges that server demand for the current quarter could be flat – which would likely weigh on investor sentiment – the long-term picture is rosy, as evidenced by Dell’s increased full-year outlook.
For investors looking to cash in on the AI ​​revolution without betting on the farm, you’ve come to the right place. Dell shares are currently selling for 21 times earnings, a significant discount to a price-to-earnings ratio of 30 for the S&P 500.
Given the recent rise in its share price, Dell will undoubtedly be a bit volatile from here on out. That said, the company is well-positioned to benefit from accelerated AI adoption, which would benefit shareholders in the long run.
Should You Invest $1,000 in Dell Technologies Now?
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Danny Vena has positions at Microsoft and Nvidia. The Motley Fool holds positions in and recommends Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Meet the newest stock in the S&P 500. It’s up 880% over the past decade, and Wall Street says it’s still a buy. was originally published by The Motley Fool
