Shares of Dell Technologies (DELL 2.57%) have rocketed 157% over the last 12 months. The growing investment in artificial intelligence (AI) infrastructure is emerging as a growth catalyst for the company, and it's why UBS analyst David Vogt sees more upside within the next year.
The analyst maintained the firm's buy rating on the shares but raised the price target from $113 to $141, representing 20% upside over the current share price.
Is Dell stock a buy?
Dell posted a decline in revenue for fiscal 2024 ending in February, but one area that saw strong demand was Dell's AI-optimized servers, where orders in the fiscal fourth quarter increased nearly 40% over the previous quarter.
But UBS sees improving lead times for Nvidia's H100 graphics processing units (GPUs), which are in high demand for AI training, benefiting Dell's server business this year. As supply of these chips increases, the firm expects AI server units to grow nearly 50% in calendar 2024.
The stock trades at a modest forward price-to-earnings ratio of 15, so it's not unreasonable to expect the stock to reach the analyst's price target if Dell's non-server business, such as the consumer PC market, can show improving growth.
However, if consumer demand for PCs, which is still a key part of Dell's business, remains weak in the near term, that could limit the stock's gains. The negative for Dell is that demand for servers wasn't enough to drive growth in total revenue last quarter, which fell 11% year over year. If investors get impatient to see growth across the business, the stock could pull back further from recent highs.
