Dell Technologies Price Target Raised by Morgan Stanley

Investing.com — Morgan Stanley (NYSE:MS) analysts on Monday (NASDAQ:MNDY) raised their price target for Dell Technologies (NYSE:DELL) from $135 to $154, driven by strong momentum in the company’s AI server business.

Analysts stress that Dell’s position in AI infrastructure is strengthening, with projected shipments of 48,000 eight-GPU AI servers in fiscal 2026 (CY2025), reflecting a 23% year-over-year increase.

This momentum is expected to generate around $20.6 billion in Dell’s AI server revenue, a 56% increase from previous forecasts. AI servers represent a major revenue stream for the company, accounting for nearly 20% of projected revenue in fiscal 2026 (FY26).

> “While our 3Q24 CIO Survey showed that DELL is the best-positioned hardware vendor to capture traditional enterprise spend over the next 3 years, our recent AI server checks show that DELL's AI infrastructure momentum is building even faster,” said analysts led by Erik W. Woodring.

Growth is attributed to customer demand, competitive gains, and substantial purchases from clients like Tesla (NASDAQ:TSLA) and CoreWeave. Furthermore, Dell may benefit from challenges faced by competitor Super Micro Computer Inc (NASDAQ:SMCI), as those customers could shift to Dell, enhancing its AI server outlook.

Morgan Stanley estimates that Dell’s FY26 earnings per share (EPS) will reach $10.50, 12% above consensus estimates, driven by AI server demand over the next two years.

In a bull-case scenario, Dell could achieve up to $40 billion in AI server revenue if it captures a third of SMCI’s business, adding billions in incremental revenue.

> “Altogether, while DELL has been a strong outperformer since shares bottomed 3 months ago, we believe DELL's outperformance has further to run thanks to this AI server momentum,” analysts stated, which is reflected in their new earnings estimates and price target.

Although the shift to AI server revenue might slightly impact gross margins, Morgan Stanley anticipates that Dell can maintain operating profitability, potentially nullifying the negative margin impact.

> “DELL's ability to scale its AI server business and benefit from layoffs announced this summer will be critical in driving incremental EPS and continued stock outperformance,” analysts noted.

The firm expects the company’s AI server operating margins to rise to 7-8% in FY26, compared to 6% the previous year.