Dell Technologies: Is It the Next Big Artificial Intelligence Stock?

Shares of Dell Technologies (NYSE: DELL) have been surging recently after the company posted strong quarterly earnings numbers, which featured plenty of growth due to artificial intelligence (AI). Dell is coming off a monstrous quarter that smashed expectations. And with AI-driven growth being responsible for the excitement, and potentially resulting in much more growth ahead, investors have been buying the stock up at a feverish pace.

At a market cap of around $300 billion, Dell isn't a small company, but it's also not among the largest, either. There could be more room for it to rise if its results continue to be as strong as they were last quarter. Could Dell become the next big AI stock to own?

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Dell's revenue jumped 88% last quarter

Last week, Dell reported its first-quarter earnings for Fiscal 2027. The period ended May 1, and it was a tremendous one for the tech company. Net revenue totaled $43.8 billion and was up an astonishing 88% year over year, while its profits more than tripled to $3.4 billion. In the previous period, to wrap up the 2026 Fiscal year, Dell's growth rate was strong but much more modest at 39%.

The big reason for the massive uptick in growth is clear: growth in AI-optimized servers. The growth in that area of its business was nothing short of amazing in Q1, with revenue totaling $16.1 billion and rising by 757%. In the previous quarter, AI server growth was already strong, at 342%, and for Dell to have significantly improved on that was an incredibly bullish sign for the business.

The company continues to see strong demand for AI servers, and investors are pricing that in. The big question, however, is whether the stock's price has now become too steep for it to be a good buy.

Has Dell's stock already become too expensive?

In just the past month, Dell's stock has more than doubled in value, with its year-to-date returns sitting at around 260%. The rise in value has pushed the stock's trailing price-to-earnings (P/E) multiple up to around 50, and a forward P/E of 32 (which is based on analyst projections).

When a stock rises so quickly in a short period, it can be highly vulnerable to a correction. However, I wouldn't be surprised if Dell's stock continues to rise in the short term, given its promising AI outlook. But you may want to tread carefully with it, given not only the recent volatility but also its inflated valuation.

David Jagielski, CPA 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.