Key Takeaways
- Dell fell 12% in the week to Nov. 9 as AI hardware stocks, Nvidia and Super Micro among them, sold off after the Nov. 3 midterms.
- As of Nov. 6, analysts hadn’t cut Dell’s earnings estimates.
- At its five-year average forward P/E, the stock looks like a buy while AI orders hold up.
- Dell’s Nov. 24 report has to turn its AI backlog into cash, and a Texas moratorium is the main risk.
Dell Technologies (DELL) fell 12% in the week to Nov. 9 with no news of its own. Nvidia (NVDA), whose chips fill Dell’s AI racks, fell 12% over the same stretch, including a 4% drop on Nov. 9 after its board opened an independent investigation into reports involving CEO Jensen Huang. Super Micro Computer (SMCI), Dell’s AI server rival, gave sellers one more reason to go on election night.
Texas voters spooked the AI trade
In Texas, Gina Hinojosa won the governor’s race after vowing “a moratorium, a ban, on all data center approvals” in an Oct. 22 video on X, as CNBC reported. Wells Fargo estimates Texas holds about 27% of planned US data center capacity.
Super Micro’s sales nearly quadrupled from a year earlier to $19.9 billion in its September quarter, but its gross margin slid to 12.7% from 17.5% the quarter before. Selling more AI servers doesn’t guarantee more profit on them.
TIKR tracks 29 analysts on Dell Technologies. How many say “Buy”?
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The estimates haven’t budged
For Dell, what matters is whether a moratorium cancels AI orders or moves them to other states. Dell’s AI backlog hit a record $95 billion at the end of July. Nvidia’s data center revenue jumped 117% to $89.0 billion in its July quarter, and it guided to $108.0 billion of total revenue for the October quarter. Nvidia reports on Nov. 17, a week before Dell, giving investors the first read on AI demand since the election.
As of Nov. 6, TIKR’s consensus still had Dell earning $25.91 a share in the year ending January 2027 and $30.30 the year after.
So the selloff came straight out of the multiple. Dell traded at about 12x forward earnings at its Nov. 6 close. That’s right on its five-year average and under half its mid-August peak of 26x.
The cash is the test on Nov. 24
Cash is the weak spot. First-half free cash flow was $4.1 billion, flat from a year earlier, while net income more than tripled to $7.6 billion. Financing Dell extends to customers buying its gear absorbed about $6.4 billion.
Investors sold Dell on a ban Hinojosa can’t order until she takes office in January, and outgoing Gov. Greg Abbott already ordered a pause on new data center permits in September, pending a state audit. At its usual multiple, with earnings expected to grow about 17% next year, the stock looks like a buy ahead of the report. The risk is that a moratorium would hit data centers that are still being planned, and those are the orders behind next year’s estimates.
So what is Dell stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
