Dell’s AI Pivot: A Masterful Move or a Desperate Attempt to Stay Relevant?
Will the demand for artificial intelligence personal computers explode in 2024 and 2025? And, will Dell Technologies (NYSE:DELL) stock generate massive revenue from AI-compatible PC sales?
The market seems to think so, and they’ve already sent DELL stock soaring. Consequently, eager investors need to be cautious now.
Before you make any judgments, be sure to study Dell Technologies’ actual financial results.
Don’t just make assumptions based on inflated projections and hype. Otherwise, you might end up holding a heavy bag and wishing you hadn’t invested in Dell Technologies at the wrong time.
Dell Rebrands Itself as an AI Hardware Company
Dell Technologies desperately wants people to know that it’s not a seller of obsolete PCs anymore. In the 2020s, Dell is doing everything it can do to rebrand itself as an AI hardware company.
This is evident in Dell Technologies Chief Operating Officer Jeff Clarke’s quote: “We have positioned ourselves well in AI.”
Clarke also said, “We’ve just started to touch the AI opportunities ahead of us.” He also said, “[W]e believe Dell is uniquely positioned with our broad portfolio to help customers build gen-AI solutions that meet performance, cost and security requirements.”
However, mentioning AI multiple times won’t magically bring AI PC revenue to Dell Technologies. A CNN article title sums up my feelings about this situation: “Dude, you’re not getting a Dell. So why is its stock soaring?”
The market, and the company itself, seem to believe that Dell Technologies will stage an epic comeback based on huge AI PC sales in the coming quarters. Yet, sensible investors shouldn’t believe it until they actually see it in the numbers.
DELL Stock Already Had Its Vertical Move
Don’t get the wrong idea. I liked the idea of investing in Dell Technologies when everybody hated and/or ignored the company. It’s a different scenario now, though.
Suddenly, based on AI hype and growth assumptions, the market really likes Dell Technologies. During the past year, DELL stock has soared from $37 to more than $100.
Hold on a minute, though. In the fourth quarter of fiscal 2024, Dell Technologies’ revenue declined 11% year over year. Furthermore, Dell’s non-GAAP operating income fell 1% YOY, and the company’s adjusted free cash flow cratered 55%.
Sure, I’m cherry-picking stats. The point, however, is that Dell Technologies’ financials certainly weren’t all ideal. Yet, DELL stock flew 32% higher soon after Dell released its quarterly data and forward guidance. So now, Dell has the difficult task of living up to the market’s high expectations for the AI PC industry.
DELL Stock Is Vulnerable to a Potential Pullback
Will the AI PC market show explosive growth, as some investors assume it will? And, will Dell Technologies succeed in rebranding itself as an AI hardware company instead of a legacy PC maker?
These questions will be answered in the coming quarters, so it’s fine to monitor Dell Technologies’ data releases in 2024 and 2025. At the same time, it’s dangerous to chase DELL stock if it’s near $100. The stock is vulnerable to a pullback, so now is the time to be a watcher, not a buyer.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
