1 Magnificent Artificial Intelligence (AI) Stock to Buy Before It Soars 28%, According to Wall Street Analysts

The tech sector's spending on artificial intelligence (AI) infrastructure isn't showing any sign of slowing down, and that explains why Dell Technologies (NYSE: DELL) is seeing improvement in its growth rate in recent quarters. The company released its fiscal 2026 third-quarter results on Nov. 25, and its earnings beat expectations. More importantly, management's guidance was also higher than expected, driven by the impressive order momentum in its server business.

Let's take a closer look at Dell's latest quarterly report and check why this tech stock seems poised to deliver solid gains to investors in the coming year.

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AI server demand is giving Dell a nice boost

For the quarter ended Oct. 31, Dell's revenue rose 11% year over year to $27 billion, a record for its fiscal Q3. The company benefited from higher sales in both its client and infrastructure segments. What's more, Dell reported a robust 17% jump in adjusted earnings to $2.59 per share. The consensus forecast among Wall Street analysts was for $2.47 per share in earnings on revenue of $27.2 billion.

Dell's top line may have been slightly behind the estimate, but its guidance was good enough for investors to overlook that. The company expects an impressive 32% year-over-year increase in revenue in the current fiscal quarter to $31.5 billion. That's well above the $27.6 billion consensus estimate. Its non-GAAP earnings are expected to jump by 31% at the midpoint to $3.50 per share, higher than the $3.21 per share estimate.

Dell's accelerating growth is being fueled by the terrific improvement in its AI server business. The company is on track to end the fiscal year with $25 billion in revenue from AI server sales, up by 150% from fiscal 2025. What's more, a closer look at Dell's order book suggests that its outstanding growth will persist.

Dell received $30 billion worth of orders for AI servers in the first three quarters of its current fiscal year, including $12.3 billion in fiscal Q3 alone. The company ended that quarter with a record AI server order backlog of $18.4 billion. The good part is that Dell's revenue pipeline is much larger than its backlog. As Chief Operating Officer Jeff Clarke said in the earnings press release:

Our five-quarter pipeline is multiples of our $18.4 billion backlog with a mix of neocloud, sovereign and enterprise customers.

As such, it won't be surprising to see Dell's growth trajectory improving next year and in years beyond. After all, the AI server market is expected to clock a compound annual growth rate of almost 39% through 2030, when it would hit $854 billion. Dell is growing at a faster pace than this market right now, suggesting that it is in line to take a greater share of the massive addressable opportunity.

Here's how much upside investors can expect

Among the 28 analysts covering the stock, Dell's average 12-month price target is $170. That would be a gain of about 26% from current levels, and the acceleration in Dell's growth suggests that it could indeed hit that mark. However, don't be surprised if Dell stock delivers much bigger gains.

The stock is trading at just 17 times trailing earnings right now. That's way below the 32 earnings multiple of the Nasdaq 100 index, a common proxy for the tech sector. Even Dell's forward earnings multiple of 11 is significantly lower than the index's average of 25. Analysts expect Dell's earnings to jump by 15% in the next fiscal year to $11.41 per share.

However, it could do better than that based on its recent growth and the outlook for the AI server market. Assuming its earnings jump by 20% to $11.87 per share next fiscal year from this year's estimated bottom line of $9.89 per share, and that Dell trades at 25 times earnings (in line with the index's average), its stock price could hit $297. That would be more than double its current price.

It won't be surprising to see the market rewarding Dell with a richer multiple due to its improving growth trajectory. That's why now would be a good time to buy this AI stock while it is still cheap, as it seems set to soar remarkably in the future.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.