Despite appearing as a bargain, Dell's profits are growing only in the mid-teens, leading to a PEG ratio of at least 1.5, which is not considered objectively cheap.

Dell Technologies Inc. recently reported fiscal third-quarter revenue of $24.4 billion, marking a 10% year-over-year increase, although it fell short of analysts' expectations of $24.6 billion.

Despite the overall revenue growth, Dell's client solutions segment, which includes PCs, saw a 1% decline in sales during the same period.

Following the earnings report, Dell's shares dropped 6% in after-hours trading, although the stock has surged 85% since the start of the year.

Chief Operating Officer Jeff Clarke highlighted a robust pipeline of future AI server orders amounting to $4.5 billion, indicating strong long-term prospects despite current challenges.

Investor concerns may stem from the revenue miss and Dell's current valuation, which stands at 25 times earnings, lower than the S&P 500 average of 31 times.

The company noted that the decline in orders is partly due to enterprise customers delaying purchases in anticipation of Nvidia's next-generation Blackwell chips.

As a leading vendor of computer clusters essential for AI development, Dell faces stiff competition from companies like Hewlett Packard Enterprise and Super Micro Computer.

Dell's Infrastructure Solutions Group reported a significant 34% increase in AI server sales, totaling $11.45 billion, with AI servers alone generating $2.9 billion.

However, Dell expressed concerns about sluggish demand in its traditional personal computer and storage sectors, which are struggling amid lower consumer spending and increased competition.

Despite these challenges, analysts from Morgan Stanley and JPMorgan maintained 'overweight' ratings on Dell, citing a record quarterly backlog of $4.5 billion as a positive indicator.

Dell's AI Factory initiative is designed to assist organizations in scaling their AI operations through integrated infrastructure, software, and services.