The AI Trade Just Broke Out Beyond Chips: 3 Stocks Powering the Next Leg Higher

Shares of Dell Technologies (NYSE: DELL) soared about 33% on Friday, marking the stock's best day ever after the computer and server maker reported its fiscal first quarter of 2027 (the period ended May 1, 2026).

The move did more than reward Dell's shareholders. It lit up a swath of stocks tied to artificial intelligence (AI) infrastructure, from server makers to enterprise software. For more than a year, the best way to bet on the AI build-out was to own the chipmakers. Friday was a reminder that the money flowing to those chips has to land somewhere: in the servers that house them and the software that puts all that compute to work.

Here's a look at three companies riding that broadening.

Image source: Getty Images.

Dell Technologies

Dell's fiscal first-quarter revenue jumped 88% year over year to a record $43.8 billion -- its fastest growth since the company returned to public markets in 2018, and a sharp acceleration from 39% in the prior quarter. The driver was AI-optimized servers, where revenue surged 757% to $16.1 billion.

But the strength wasn't confined to AI gear. Dell's infrastructure solutions group, which houses its data-center hardware, grew 181% to $29 billion, and even the traditional, non-AI server and networking business climbed 92%. And non-GAAP (adjusted) earnings per share rose 214%.

Additionally, management raised its full-year revenue outlook to between $165 billion and $169 billion and lifted its AI server revenue target to $60 billion.

"[O]ur pipeline indicates demand is not slowing, but accelerating," said Dell vice chairman and chief operating officer Jeff Clarke in the company's fiscal first-quarter earnings call.

At about $421 as of this writing, and up roughly 234% in 2026, the stock trades at about 24 times management's full-year adjusted earnings guidance -- a fair multiple for that pace of growth.

Hewlett Packard Enterprise

Hewlett Packard Enterprise (NYSE: HPE), Dell's chief rival in enterprise servers, didn't report anything Friday. It simply jumped about 13% to a new high in sympathy, and it heads into its own fiscal second-quarter report on Monday.

The read-across is reasonable. In its most recent quarter -- the fiscal first quarter, ended Jan. 31, 2026 -- HPE's revenue rose 18% to $9.3 billion, and its networking business, supercharged by the Juniper Networks acquisition, grew 151.5%. That segment alone now drives more than half of HPE's profit. The company has guided to fiscal second-quarter revenue of $9.6 billion to $10 billion.

At about $43, HPE trades about 18 times its full-year adjusted earnings outlook -- cheaper than Dell -- a discount that likely primarily reflects its smaller AI-server business.

ServiceNow

If Dell and HPE show AI spending pushing into hardware, ServiceNow (NYSE: NOW) is the software side of the same story.

The workflow-automation company climbed about 14% on Friday as beaten-down software names rallied. ServiceNow had been hit hard this year on fears that AI would erode demand for enterprise software; even after Friday's pop to about $124, the stock sits about 40% below its 52-week high, and its market value has fallen from around $233 billion to about $128 billion as of this writing.

But the company's results tell a story that doesn't align with the fears of disruption. First-quarter subscription revenue rose 22% year over year to $3.7 billion, and its AI suite, Now Assist, is now tracking toward $1.5 billion in annual contract value this year, up from a $1 billion target. Now Assist customers spending over $1 million in annual contract value grew over 130% year over year -- a sign AI is expanding ServiceNow's business rather than cannibalizing it.

The catch, however, is valuation. Even after the sell-off this year (and including the stock's move higher late last week), ServiceNow shares still trade at a mid-30s price-to-earnings ratio on adjusted earnings.

The downstream impact of hyperscaler spending

Overall, it's becoming increasingly clear that hyperscalers' big spending has a downstream effect on other businesses, too. In 2027, major cloud providers are on track to spend more than $700 billion on AI infrastructure. Sure, that money starts with chips. But it doesn't stop there. Some of it is now flowing into the servers Dell and HPE assemble, and the software that turns raw compute into useful work. And Friday was the market connecting those dots in real time.

But chasing Friday's pops carries risk. The hardware names are cheaper for a reason: their thin margins and the cyclicality tied to a spending cycle that won't last forever. Meanwhile, ServiceNow's higher-quality software-based business still comes at a steep valuation premium.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hewlett Packard Enterprise and ServiceNow. The Motley Fool has a disclosure policy.