Dell Technologies has made a name for itself as a leading player in the artificial intelligence (AI) arena, despite its initial public offering in 1988. The company is re-establishing itself as a major force in the AI server industry. While we are considering adding Dell to our portfolio, we proceed with caution, mindful of the risks highlighted by technical indicators and the company’s potential for fundamental growth in the years ahead. Dell’s valuation remains reasonable at 26 times expected GAAP earnings of $4.68 in 2025 and 16.50 times expected EPS in 2025. The company recently announced a 20% dividend increase. However, headwinds have emerged, with analysts expressing concern over a potential reduction in AI infrastructure spending by corporate management teams. Inventory buildup is another concern, given the scarcity of GPUs, the uncertain macroeconomic climate, and declining PC demand. A correlation analysis reveals an inverse relationship between inventory levels and price, with inventories declining from $6.35 billion to $3.62 billion, coinciding with a rise in price. A relative rotation graph comparing Dell to Apple (AAPL) and Super Micro Computer (SMCI) shows Dell and Apple gaining favor, while SCMI has retreated after a strong performance in Q1 of ’24. Turning to Dell’s technical price chart, we observe a consolidating triangle pattern, characterized by five swings of lower-highs and higher-lows, according to the Elliott Wave principle. Given the recent market weakness, we anticipate a buying opportunity for Dell if it retreats to $124.50, with stop losses set below the April low of $113.75.
Dell Technologies: A Prominent Player in the AI Arena
