Shares of Dell Technologies (DELL) are up in today’s trading after Bloomberg reported that the tech hardware company is in advanced discussions to secure a massive contract worth over $5 billion to provide servers optimized for artificial intelligence to Elon Musk’s xAI. The deal would involve Dell selling servers equipped with Nvidia (NVDA) GB200 semiconductors to xAI, with delivery expected this year.
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The potential contract illustrates the growing demand for high-powered servers capable of running AI workloads. Dell, along with other server manufacturers like Super Micro Computer (SMCI) and Hewlett Packard Enterprise (HPE), has seen a surge in demand from companies like Tesla (TSLA) and xAI.
As a result, analysts expect Dell’s AI server business to continue booming, with forecasts suggesting the company will ship $14 billion worth of AI servers in the fiscal year ending January 2026. This would be a significant increase from the estimated $10 billion worth of AI servers shipped in the previous fiscal year. The deal with xAI is expected to be a major contributor to this growth, although its impact on profitability is less clear. In addition, according to Bloomberg Intelligence analyst Woo Jin Ho, the deal “would firmly establish the company as a leading AI-server provider and boost sales.”
Is DELL Stock a Good Buy Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on DELL stock based on 14 Buys, two Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 39% rally in its share price over the past year, the average DELL price target of $147.74 per share implies 30% upside potential.
