We recently compiled a list of the 7 Best Computer Hardware Stocks to Buy. In this article, we are going to take a look at Dell Technologies Inc. (NYSE:DELL) against the other computer hardware stocks.
According to a report by Research and Markets, the computer hardware market is projected to grow from $674.44 billion in 2023 to $710.32 billion in 2024, with a 5.3% compound annual growth rate (CAGR), mainly driven by personal computing, global supply chains, internet expansion, and more data centers.
By 2028, the market is expected to reach $914.55 billion at a 6.5% CAGR, fueled by trends like remote work infrastructure, sustainable practices, smart city development, and digital transformation. Key trends include edge computing, AI integration, modular systems, biometric security, and hybrid cloud environments, with significant investments in smart city projects, particularly in China.
The most important trends in the advancement of computer hardware are AI and machine learning which are revolutionizing hardware design and enabling applications like autonomous vehicles and robotics. Apart from that, the Internet of Things (IoT) is expanding, connecting more devices in smart homes, cities, and industries. It has led to a focus on improving security, efficiency, and the ability of different IoT devices, systems, and technologies to work together seamlessly.
Role of AI in the Growth of the Computer Hardware Industry
On May 28, Michael Fertik, founder of Heroic Ventures, joined CNBC’s ‘Squawk Box’ and said that we’re still in a phase of AI development where hardware is crucial. Companies like NVIDIA are thriving because their products are essential for running large AI models, which require immense computational power. He said that this situation is similar to how search engines, like Google or Bing, have long relied on substantial investments in hardware to function effectively.
Fertik added that as AI technology evolves, there will be a shift. The costs associated with AI hardware will decrease, and smaller, more specialized AI models will emerge, which will be tailored for specific industries or purposes.
When this happens, the focus and financial gains will also move toward software and computer science (software testing and development) companies. However, they will not significantly move from computer hardware companies and they will still benefit from the growing AI industry.
Industry Has Room for Growth Beyond AI
A major growth prospect for computer hardware is quantum computing, an industry that is expected to reach $11.4 billion by 2027 from $2.74 billion in 2022, according to Research and Markets. Quantum Computing offers significant benefits by improving the speed and efficiency of complex computations.
Unlike classical computers, which process bits as 0s or 1s, quantum computers use qubits that can represent multiple states at once, which enables them to solve problems much faster. This is especially valuable in fields like cryptography, drug discovery, financial modeling, and optimization as it solves complex simulations and calculations that are currently infeasible for classical computers.
Quantum Computing can significantly benefit the computer hardware industry by driving advancements in technology and creating new markets. Similar to AI, the development of quantum hardware requires innovations in materials science, cooling systems, and chip design, which can push the boundaries of traditional hardware engineering.
As quantum computers become more practical, they will require specialized hardware components, which will create new opportunities for companies to develop and supply these advanced technologies. For more details, you can read our article about the 12 Best Quantum Computing Stocks To Invest In.
Our Methodology
For this article, we used stock screeners and other financial media websites to identify 12 computer hardware companies with market capitalizations of above $1 billion. The analyst comments and ratings were mostly taken from The Fly and TipRanks.
A team of IT experts discussing the latest network security trends over a laptop screen.
Dell Technologies Inc. (NYSE:DELL)
Stock Price as of August 9: $92.55
Average Analyst Price Target Upside as of August 9: 75.04%
Dell Technologies Inc. (NYSE:DELL) tops our list of the best computer hardware stocks to buy now. The company is a leader in manufacturing, producing, and marketing a range of tech products and services. This includes personal computers, servers, storage systems, and networking tools. The company’s operations are divided into two main sectors: Client Solutions Group (CSG) and Infrastructure Solutions Group (ISG).
The CSG is dedicated to personal computing, offering a range of products like desktops, laptops, and workstations designed for both individual and business use. Meanwhile, the ISG focuses on the backbone of enterprise technology, encompassing servers, storage solutions, and networking infrastructure. This segment provides critical components for business operations. Dell’s (NYSE:DELL) portfolio features personal computers from the XPS and Inspiron lines, servers such as PowerEdge, and storage solutions through Dell EMC, among other offerings. Both segments stand to gain significantly from the growing demand for AI technology.
Dell (NYSE:DELL) is making significant strides beyond its well-known personal computing hardware. While personal computing remains a core part of its business, the company is emerging as a major player in the AI sector. The company’s investment in servers designed for AI applications has paid off, especially as the popularity of AI technologies, like ChatGPT, has surged.
This focus has helped drive Dell’s (NYSE:DELL) stock higher and boost its financial performance. In the first quarter of the fiscal year 2025, the company reported a 6% increase in revenue, reaching $22.2 billion. A major contributor to this growth was its IT infrastructure segment, which saw a 22% year-over-year revenue increase, totaling $9.2 billion. This segment now accounts for over 40% of the company’s total sales, up from 36% a year earlier. The expansion is largely owed to the company’s success in offering hardware that meets the demands of AI technology, which the company claims is one of the largest portfolios of AI-enabled equipment.
Its leadership in the global server market positions it well for future growth. The AI server market is anticipated to expand to approximately $150 billion by 2027, a significant increase from the current $30 billion, according to Lisa Su of Advanced Micro Devices, Inc. (NASDAQ:AMD). This presents a substantial opportunity for the company.
In its Q1 2025 results, the company reported record revenues in servers and networking. AI-optimized server orders rose to $2.6 billion, with shipments doubling to $1.7 billion and backlog growing by over 30% to $3.8 billion. Dell’s (NYSE:DELL) scale, efficiency, and stability put it in a strong position to capitalize on these trends and continue its growth trajectory.
The company’s strong performance has caught the attention of analysts. Morgan Stanley’s Erik Woodring highlighted Dell (NYSE:DELL) as a Top Pick in June, noting its solid position in the rapidly growing AI server market. The company’s competitive edge, improved margins, and better storage solutions are expected to enhance its valuation and performance. The firm maintained its Overweight rating and $155 price target. Additionally, the stock has been covered by 26 analysts who have given a consensus Buy opinion for it. The average price target of $162.00 implies an upside of 75%, as of August 9.
Carillon Scout Mid Cap Fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its first quarter 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) reported results that exceeded earnings expectations and announced a better than expected AI-optimized server order pipeline. We expect Dell to participate in the growth of artificial intelligence hardware in its server, storage and personal computing franchises. Long-term, we like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
Overall DELL ranks 1st on our list of the best computer hardware stocks. While we acknowledge the potential of DELL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DELL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.