Dell Technologies (DELL -2.64%) The stock has returned a spectacular 81% so far in 2024. The hardware giant is benefiting from a wave of demand for artificial intelligence (AI) infrastructure solutions that is driving strong growth and prospects for profits that are accelerating.

The results earned Dell inclusion in the S&P500 index, highlighting the company’s leadership in the industry and blue chip Status. On the other hand, the stock hasn’t been immune to volatility. It is currently down 25% from the record high of $179.70 on May 29.

Let’s discuss whether now is the right time to add Dell Technologies stock to your portfolio.

Growth powered by AI

Artificial intelligence has quickly emerged as one of the most important technological themes in recent years. Advances in machine learning and generative AI are already driving transformative gains in productivity and efficiency across various industries. There is a sense that innovation in AI applications is only just beginning.

While specialized AI chips from companies like Nvidia Or Advanced microdevices For the proverbial magic to happen, a hardware ecosystem is equally essential. In this case, Dell servers that host AI chips alongside data center networking equipment are ground zero for capturing the same secular growth tailwinds.

The results were impressive. In the second quarter (for the period ended August 2), Dell management noted that AI momentum accelerated, resulting in a 38% increase in group revenue of infrastructure solutions compared to the prior year quarter. This strength more than offset weakness in the consumer side of the business covering personal computers (PCs) and their accessories.

The current shift towards high-value AI products has resulted in increased profitability, despite continued cost pressures and intensive capital expenditure.

For the full year, Dell expects annual revenue growth of approximately 10% and a median adjusted earnings per share (EPS) estimate of $7.80, an increase of 9% from to last year. The company also expects annual revenue growth of 3-4% and annual EPS growth of more than 8% in the long term.

Strong cash flow supported ongoing share buybacks and debt repayments, evidence of overall strong fundamentals, with the expectation that these trends will continue.

Image source: Getty Images.

Leadership in AI Hardware

The appeal of Dell Technologies stock as an investment lies in the company’s diverse group of products and its leading position in terms of market share in the key categories of servers, PCs and storage. Although some segments have faced intense competition and moderate growth, there is much optimism about the new opportunities presented by AI.

Dell estimates that it operates in a $121 billion addressable market for hardware and services, which is expected to grow 44% to $174 billion by 2027. The ability to solidify its leadership position is expected to translate directly through profitable growth.

In 2025, Dell is also well positioned to capture a possible rebound in the consumer PC market. A context of resilient macroeconomic conditions through 2025, with the expectation of a further reduction in interest rates by the Federal Reserve, could restart a PC refresh cycle facilitated by improving consumer credit conditions . The optimistic argument for the stock is that Dell can ultimately exceed expectations.

Perhaps the biggest development in the industry was turmoil among competitors Super microcomputerwhich competes with Dell in the AI-optimized high-performance computing server segment. In this case, Super Micro was rocked by an accounting scandal since its auditor resigned in October, creating significant uncertainties about the company’s prospects. Dell stands to gain if it can use this situation to generate business from customers looking for a new supplier.

While there is reason to be cautious, Dell’s stock trades at 18 times its forward full-year EPS estimate. price/earnings ratio (P/E). This level represents a premium to the multiple’s five-year average, closer to 11. Dell’s exposure to the high-growth AI server sector may justify this broader allocation, but it also adds to risks in a scenario where the results are disappointing.

DELL PE ratio (forward) data by Y charts.

Is Dell a Buy?

I think Dell shares deserve a Buy rating and are a great option for investors within a diversified portfolio after the selloff from its all-time high earlier this year. A strong update when the company reports third-quarter results on November 26 could be a catalyst for the stock to move higher.