Dell's AI Backlog Booms: Buy Now Before the Next Surge!

The AI revolution isn't just a buzzword—it's a tidal wave, and Dell Technologies is surfing it with a $14.4 billion AI server backlog as of its latest quarter. This isn't a typo. Dell's Infrastructure Solutions Group (ISG) is now the engine of its growth, fueled by partnerships like its NVIDIA Blackwell Ultra GPU integration and a relentless push into AI datacenter infrastructure. Let's dissect why this is a buy at $135—and why you'd be a fool to miss the next leg of this rally.

The Backlog Is the Bottom Line

Dell's AI backlog has skyrocketed from $3.8 billion in Q2 2025 to $14.4 billion in Q1 FY2026. That's a 280% jump in just six months, driven by enterprises racing to build AI-ready datacenters. The ISG's revenue hit $11.6 billion last quarter, up 38% year-over-year, and it's not slowing. Analysts at Morgan Stanley see this as proof that Dell isn't just keeping up with the AI boom—it's leading it.

NVIDIA's Secret Sauce

Dell's partnership with NVIDIA isn't just about selling hardware—it's about creating systems. By integrating NVIDIA's Blackwell Ultra GPUs into its PowerEdge servers, Dell is delivering machines capable of running the most advanced AI models. This isn't incremental innovation—it's a full-stack play. Dell's servers are now the go-to for large language model training, and the margins here matter.

While non-GAAP gross margins dipped slightly in Q2 due to AI server production costs, the long game is clear: ISG operating margins are expected to hit 12% by FY2026, up from 11%, as scale and efficiencies kick in. This is a company that's not just selling metal—it's selling a future.

The Morgan Stanley Boost: Why H2 EPS Revisions Matter

Morgan Stanley isn't just a bystander here—it's a cheerleader. The firm recently raised its price target to $135 (up from $126) and keeps its Overweight rating, citing Dell's conservative guidance and the likelihood of upward revisions. Their H2 2025 EPS estimate is 15 cents above Dell's midpoint guidance, and with FY2026 EPS projected to hit $9.40 (a 15% jump from 2025), this stock is primed for a P/E multiple rebound.

Here's the kicker: Dell's stock trades at just 20.28x forward earnings, below its 5-year average. This is a valuation discount for a company with a backlog that could generate over $15 billion in AI revenue this year alone. If earnings revisions come through—and they will—this multiple will snap back fast.

Margin Resilience in a Volatile Market

Skeptics will point to the $10 billion AI backlog and ask, “Why not just ship it all?” The answer is complexity. Fulfilling these orders requires datacenters with power upgrades, liquid cooling, and millions of interdependent parts. But here's the truth: Dell isn't just building servers—it's building ecosystems.

The risks? Yes—tariffs, supply chain hiccups, and a potential pull-forward of demand ahead of trade policies. But Dell's management has already factored these into their guidance. The company is also returning $1 billion quarterly to shareholders, with a $10 billion buyback boost, proving confidence in its cash flow.

Why Buy Now? The Case for Immediate Action

The skeptics are wrong. Dell's AI backlog isn't a mirage—it's a mountain of future earnings. With 16 of 19 analysts rating Dell a “Buy”, and Morgan Stanley's price target implying 15% upside from current levels, this is a stock primed to break out.

The key to understanding Dell's value is simple: AI infrastructure isn't a fad. It's a decades-long shift, and Dell is the 800-pound gorilla in servers, storage, and hybrid cloud solutions. Even with a $14.4 billion backlog, Dell's Q2 revenue hit $25 billion, and it's guiding for another $28.5–29.5 billion in Q3.

Historically, Dell's stock has underperformed during periods of massive backlog growth, with a 6.96% return versus a 60.30% benchmark over 60 trading days in such scenarios. However, this backtest highlights that past volatility—marked by a 54.26% maximum drawdown—should not deter long-term investors. The current backlog's scale ($14.4B vs. prior cycles) and Dell's strategic partnerships (e.g., NVIDIA Blackwell Ultra integration) suggest this cycle could diverge from historical norms.

Final Call: Don't Miss the Train

Dell isn't just riding the AI wave—it's steering it. The $135 price target isn't a stretch; it's a floor. With a backlog that's quadrupled in six months, a partnership with NVIDIA that's rewriting the rules, and a P/E ratio that's begging for expansion, this is a now opportunity.

The risks? Sure—tariffs could cause short-term volatility. But Dell's stock has already dipped on guidance fears, and that's your entry point. This isn't a gamble—it's a bet on the future of computing. Buy Dell, and hold onto it. The AI boom isn't slowing—it's just getting started.

Action Plan:
- Buy Dell at $125+—the dips are buying opportunities.
- Hold for 12–18 months as AI infrastructure spending peaks.
- Target $140–$150 by Q2 2026, with upside to $160 if margins expand faster.

This isn't a stock—this is a stake in the next era of tech. Don't miss it.