Shares of Dell Technologies DELL fell nearly 6% on Monday after UBS downgraded the company to “Neutral” from “Buy,” arguing that the stock’s sharp rally this year has already captured much of the upside from booming demand for artificial intelligence infrastructure.
Dell shares dropped 5.8% to $245.35, underperforming broader markets as the S&P 500 and Nasdaq Composite gained 0.34% and 0.29%, respectively.
The decline came after the stock nearly doubled in value this year and surged 137% over the past 12 months, making Dell one of the top-performing companies in the benchmark index.
UBS, however, raised its price target on the stock to $243 from $167, citing confidence in the company’s server business and ability to benefit from the accelerating adoption of AI technologies.
AI demand boosts server business
UBS analyst David Vogt said Dell’s differentiated technology offerings and supply-chain strategy had helped it gain momentum in AI-optimised servers while managing rising input costs such as memory prices.
The brokerage expects Dell’s earnings to grow 25% in fiscal 2027 and projects the company’s AI server business to double over the same period.
Dell has also benefited from turbulence at rival Super Micro Computer after US authorities charged one of the company’s co-founders with allegedly violating export-control laws involving Nvidia chips.
Analysts believe some customers may have redirected orders to Dell in recent weeks following the allegations.
Still, UBS said Dell’s stock price had already climbed roughly 70% since news of the charges emerged, limiting further upside potential.
Valuation concerns emerge
The brokerage said investors were increasingly pricing in annual earnings-per-share growth of 30% to 35%, significantly above both Dell’s own long-term guidance and UBS’ forecasts for mid-teen growth.
According to UBS, while Dell could continue to raise guidance over the next few quarters, much of those expected upgrades were likely already reflected in the current valuation.
The bank also forecast Dell’s revenue growth would moderate sharply to around 6% to 7% in fiscal years 2028 and 2029 after the current wave of AI-driven expansion.
Analysts added that Dell has relatively higher exposure to enterprise and neocloud customers, segments where capital expenditure growth may slow compared with large hyperscale cloud providers investing aggressively in AI infrastructure.
Wall Street turns more cautious
A growing number of analysts on Wall Street have adopted a more cautious stance toward the stock in recent months.
According to FactSet data, the proportion of brokerages rating Dell shares as the equivalent of “Hold” has risen to 31% from 19% in January.
“The risk-reward going forward is more balanced following strong execution over the past 12 months,” Vogt said in the note.
Despite the downgrade, bullish sentiment around Dell’s AI prospects remains strong across the market.
Last week, analysts at Mizuho Financial Group raised their target price on Dell shares to $260 while maintaining an “Outperform” rating.
Bank of America also increased its price target to $246 and reiterated a “Buy” recommendation, citing growing opportunities in agentic AI and rising demand for AI servers and storage.
How Trump’s endorsement has added momentum
Investor enthusiasm also received an unexpected boost last week after US President Donald Trump publicly praised the company during a White House event.
At a Mother’s Day gathering, Trump thanked the Dell family and encouraged attendees to “go out and buy a Dell,” comments that helped propel the stock to record highs on Friday.
The endorsement added to optimism surrounding Dell’s transformation from a traditional PC maker into a major AI infrastructure provider, a shift that has reshaped investor perceptions of the company over the past year.
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