This "AI Factory" Growth Stock Is Up 85% in 12 Months -- and It's Still Cheap

Dell Technologies (NYSE: DELL) has long been known as a leading manufacturer of personal computers. However, most of its growth these days is coming from its artificial intelligence (AI) infrastructure business.

In fact, Dell now refers to itself as an AI Factory, in partnership with Nvidia, that provides customers with AI systems and solutions. Dell makes the servers and hardware, while Nvidia offers the software and chips that are packaged for sale to hyperscalers, cloud providers, enterprises, and AI data center customers.

Dell stock has been one of the clear-cut tech stock winners this year, up 35% year to date and roughly 85% over the past 12 months. Despite that strong share price growth, the stock is still sporting a cheap valuation. Is it worth a closer look?

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Despite being a veteran tech giant, Dell is still growing like a startup

Dell has two major business lines. The first is its client solutions group (CSG), which is basically its PC business and all the products related to computers. This has been Dell's bread and butter for years, until recently.

The other business is the infrastructure solutions group (ISG), which provides servers, networking equipment to sync and connect them with other infrastructure, and data storage. This business, in general, provides AI infrastructure and includes the AI Factory business.

It has been growing by leaps and bounds, particularly over the past year or so. In the most recent quarter, ended Jan. 30, ISG generated $19.6 billion in revenue, up 73% year over year. Its AI-optimized servers saw revenue shoot 352% higher, while networking revenue soared 27%. Further, operating income in this segment rose 41% to $2.9 billion.

Overall, Dell had record revenue in its fiscal fourth quarter and for the full fiscal year. It even had strong results in CSG, led by increased sales of its new AI PCs. The CSG side of the house saw revenue jump 16% year over year in fiscal Q4 to $11.6 billion, while operating income rose 14% to $13.5 billion.

Dell has more room to run

Even with the strong business and stock price growth this past year, the momentum is expected to carry into this fiscal year. Revenue is anticipated to rise 51%, while earnings are targeted for an 87% jump year over year in fiscal Q1. For the full fiscal year, Dell guides for a 103% year-over-year increase in AI-optimized servers. Revenue is targeted for a 23% increase, while earnings are projected to jump 33% for the full fiscal year.

Dell might be one of the best values in the tech sector right now. When you combine this type of growth with a relatively low valuation, it should spell significant upside for the stock.

Dell is still trading at just 18 times earnings after this 85% run over the past year. Its forward price-to-earnings (P/E) ratio is even lower at just 12.

I called Dell out a little over a month ago as a bargain stock ready for a bull run, and it remains so. In the past month alone, the stock has risen about 15%. And it still has room to run.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.