HP vs. Dell: Which AI Infrastructure Stock Is the Better Buy?

HP (NYSE: HPQ) and Dell (NYSE: DELL) are both competing in the AI PC market. Both of them have dominated the PC industry for years, but those same computers will soon have built-in AI capabilities.

They both offer AI servers as well, which have become valuable parts of AI infrastructure, but one of these tech stocks looks better than the other. Here's what investors should consider when deciding which stock to buy.

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HP has a much better valuation

Investors who like value stocks should prioritize HP. The company only has an 8.5 P/E ratio, which is much lower than Dell's 31.8 P/E ratio. If the AI theme experiences any slowdowns, HP is more insulated than Dell.

Dell has also enjoyed a much better rally than HP. While Dell has more than tripled year to date, HP is only up by 2% year to date because of a recent correction of more than 20%. The big Dell rally puts the stock at a higher valuation, which makes it riskier for new investors. HP offers the opposite setup, with a recent correction presenting a buying opportunity.

Both companies have been improving their fundamentals in recent quarters, but only one of them has marched higher halfway through 2026. Contrarian investors can benefit if HP reports strong earnings and reinvigorates bullish momentum.

Dell is growing much faster

Although Dell has a higher valuation and is more exposed to macroeconomic weaknesses or AI slowdowns thanks to its substantial year-to-date rally, it's the faster-growing company. Dell's AI servers contributed to 88% year-over-year revenue growth in its fiscal 2027 first quarter.

Dell's chief operating officer, Jeff Clarke, told investors to expect $60 billion in AI server revenue in fiscal 2027 and said this guidance shows that "the AI opportunity shows no signs of slowing." Its AI servers delivered 757% year-over-year revenue growth, accounting for more than one-third of total revenue.

HP's 9% year-over-year revenue growth rate in its fiscal 2026 second quarter looks far less attractive in comparison. A low valuation compensates for the lower growth rate, but it shows that Dell is gaining market share much faster.

This trend will likely continue. AI servers are the main catalyst for Dell's growth, but they are a smaller part of HP. The latter's growth story mainly revolves around AI PCs, while that product category has a more limited impact on Dell's financial results.

HP's guidance for its fiscal 2026 third quarter didn't do much to change that picture. The company said it anticipates diluted EPS to range from $0.47 to $0.63, which represents a year-over-year decline from the $0.75 diluted EPS from the same quarter last year. HP did not provide a revenue outlook in its fiscal 2026 second-quarter press release, which is concerning since that's a critical detail investors should know amid the AI boom.

The final verdict

HP has a place for people who want value stocks. Dell is riskier due to its run-up and elevated P/E ratio compared to HP. However, Dell trades at a higher valuation because it is the better company.

Investors who want more exposure to AI and higher potential returns should prioritize Dell. Its AI servers are producing significant year-over-year revenue growth and are poised to build on that momentum for the rest of the year. Dell's guidance was also more compelling than what HP offered to its investors.

Dell's valuation should get more attractive as it continues to deliver high revenue growth and boost its net profit margins. Dell's net profit margin almost reached 8% in its fiscal 2027 first quarter compared to a 4.13% net profit margin in the same quarter last year.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends HP. The Motley Fool has a disclosure policy.