UBS has downgraded Dell Technologies' stock from buy to neutral, indicating that the strong demand for its AI-related servers is already reflected in the stock price. Analyst David Vogt noted that while the price target for Dell shares has been raised to $243 from $167, this still implies a potential downside of about 7% from the recent closing price.
Over the past year, Dell's stock has surged by 172%, significantly outperforming the S&P 500's 31% gain. The company has benefited from the increasing demand for AI processing power, generating $13 billion in revenue from its AI server business in the first quarter of fiscal 2027.
However, Vogt expressed concerns that the recent surge in Dell's stock price, which has increased approximately 70% since news of illegal exports of Nvidia GPU-based servers by a competitor, may not be justified given the modest near-term earnings per share upside.
He also pointed out that Dell's customer capital expenditures are expected to grow at a slower rate compared to larger tech companies like Meta, Google, Amazon, and Microsoft, which have stronger financial positions. This downgrade contrasts with the broader market sentiment, as 20 out of 28 analysts covering Dell still maintain a buy or strong buy rating