The demand for artificial intelligence (AI) infrastructure is booming as cloud service providers, hyperscalers, and countries across the world are spending aggressively on this technology to develop large language models (LLMs) and deploy them to increase productivity for themselves and their customers.
This explains the growth rate in sales of AI chips, servers, and edge devices such as smartphones and personal computers (PCs). Market researcher IDC says that the global sales for servers rose 134% year over year in the first quarter of the year to a record $95 billion, driven by investments in AI infrastructure. IDC now expects the server market to have 45% growth in 2025 to reach a record $366 billion in revenue.
And shipments of AI equipped PCs are expected to jump by 165% in 2025, according to Gartner.
Let's take a closer look at one company that's a key player in both these markets and is trading at an extremely attractive valuation right now.
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Dell is on track to win big from both these end markets
Dell Technologies (DELL 1.58%) sells servers and PCs, besides other computer peripherals. The booming demand for AI servers has given one half of the company's business a big boost in recent quarters.
When Dell released its first-quarter fiscal 2026 results (for the three months ended May 2) on May 29, it reported a 12% year-over-year jump in revenue for its infrastructure solutions group to $10.3 billion. And the company booked $12 billion in orders for its AI servers in the quarter.
That's higher than Dell's AI server shipments last year, indicating that this business is set to gain more momentum. Management expects to ship $7 billion worth of AI servers in the current quarter, which would be around four times its fiscal first-quarter shipments. That seems achievable considering that the company's AI server backlog was $14.4 billion last quarter.
And its AI server backlog has the potential to grow further, based on management's comments on the latest earnings conference call.
So Dell's AI server revenue still has a lot of room to grow -- not surprising considering that the company is the leader in the global server market with an estimated share of more than 19%. The pace of new orders -- and the revenue pipeline that it points toward -- indicate that it should capture its share of the global end-market opportunity in servers.
Dell's client solutions group (CSG) -- which includes sales of laptops, desktops, and peripherals -- has started seeing an uptick in growth. Its CSG revenue was up 5% in the previous quarter to $12.5 billion. Almost 90% of that figure was from the commercial segment, which is benefiting from the upgrade to AI-enabled Windows 11 PCs.
The company is the third-largest player in the PC market with an estimated share of 16.3% in the first quarter of 2025. Its shipments increased by 2.1% year over year in the first quarter, and sales could gain momentum as the year progresses because management says there are indicators that its installed base is upgrading to new Windows 11 PCs, many of them with AI.
With shipments of AI-equipped PCs expected to increase 32% annually over the next decade, the company has terrific room for growth in this market. That has led management to raise sales estimates for the current and the next two fiscal years.
DELL Revenue Estimates for Current Fiscal Year data by YCharts.
Dell's stock is too cheap to ignore right now
Dell stock is trading at just 19 times trailing earnings, while the forward earnings multiple of 13 is even more attractive. Buying the stock at this valuation seems like a no-brainer considering the healthy prospects in the AI server and PC markets discussed above, which is expected to lead to similar earnings growth.
Consensus analyst estimates project a 15% increase in earnings this year to $9.39 per share, followed by double-digit growth over the next couple of years as well.
DELL EPS Estimates for Current Fiscal Year; data by YCharts.
And Dell could do even better than that given the rate of improvement in its AI server revenue pipeline. Meanwhile, the stock's price/earnings-to-growth ratio (PEG) of 0.95 (based on analysts' five-year estimates as per Yahoo! Finance) suggests that Dell is undervalued considering its potential long-term bottom-line growth.
So, investors looking for an incredibly cheap AI stock with the potential for healthy upside in the long run should consider Dell before it flies higher following its 33% gains in the past three months.
