By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panelists generally express caution about the current valuations and growth prospects of HPE and Dell, with concerns about the sustainability of AI-driven revenue growth, potential margin compression, and the risk of capital expenditure cycles peaking. They also highlight the risk of hyperscale customers shifting towards custom silicon and liquid cooling solutions.
Risk: Potential margin compression due to normalization of GPU pricing and AI capex cooling, as well as the risk of being left with stranded assets when hyperscale demand shifts to custom silicon.
Opportunity: Potential higher system-level demand and sustained margins if Dell and HPE win more integration services in the face of custom silicon and liquid cooling trends.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
HPE's networking revenue increased 148% in the second quarter of 2026.
Dell's AI server revenue grew an eye-popping 757% year over year.
Hewlett Packard Enterprise (NYSE: HPE) and Dell Technologies (NYSE: DELL) are booming amid the AI infrastructure-building spree. Both are experiencing explosive growth, but which stock is the better long-term pick right now? Let's have a look.
HPE just reported a record Q2, with revenue reaching $10.7 billion, and its EPS beat estimates by $0.79. Revenue grew 40% year over year. Specifically, networking revenue grew by over 148%, and the Cloud and AI segment increased 23%.
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HPE raised its full fiscal 2026 revenue growth range to 29% to 33%, a huge bump from the 17% to 22% outlook from the previous quarter. Shares of HPE are up almost 124% this year as of this writing.
HPE's quarterly numbers were excellent, but Dell's were jaw-dropping. AI server revenue grew an astounding 757% year over year, reaching $16.1 billion. Total revenue increased 88% year over year. The company blew past Wall Street expectations for EPS, reporting earnings of $4.86, well above the $2.94 consensus.
Dell's share price is up more than 234% year to date as of this writing.
Because of Dell's skyrocketing stock price, the company's valuation metrics are now quite high. HPE is also trading with higher metrics, but Dell has a higher forward and trailing price-to-earnings (P/E) ratio, price-to-sales ratio, and enterprise value to EBITDA.
Who we choose as the winner is a nuanced decision. Dell is a higher-risk, higher-reward stock than HPE. Dell is benefiting from historic AI revenue acceleration, whereas HPE is a steadier and more diversified business. At the same time, HPE offers improving margins and a cheaper valuation.
If you're an aggressive investor with a risk appetite, Dell is a solid choice based on the company's momentum. For those who don't want to be quite as aggressive, HPE's stock is compelling in a red-hot market with frothy valuations, thanks to its more down-to-earth pricing.
Ultimately, the stock you choose depends on your personal risk profile, but both HPE and Dell are winners in the AI infrastructure boom.
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hewlett Packard Enterprise. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Valuation risk and AI-capex durability dominate near-term upside; a slowdown in AI spending could trigger multiple compression even if current fundamentals remain decent."
Both HPE and Dell ride the AI infrastructure wave, but the article masks durability risks and base effects. Dell’s 757% AI server revenue growth sits on a tiny base and is likely to be lumpy, with margins pressured as pricing normalizes and after-sales costs rise. HPE’s 40% revenue growth and raised 29–33% full-year guidance look steadier, yet they reflect a broader networking/Cloud mix rather than pure AI hardware, leaving them exposed to broader IT spending cycles. Valuations are stretched, with Dell carrying the higher forward P/E and EV/EBITDA. The real test is whether AI capex can sustain or decelerate, which would impact both names.
The AI server surge could fade quickly if hyperscale buyers pause capex or reallocate budgets, making the current gains fragile and valuations vulnerable to a re-rating. HPE’s diversified mix could also underwhelm if AI-related tailwinds cool.
"The current explosive growth in AI server revenue is masking potential margin degradation and cyclical risks that will likely cause a valuation contraction for DELL."
The market is currently pricing both HPE and DELL as pure-play AI infrastructure winners, but this ignores the cyclical nature of their legacy hardware businesses. While DELL’s 757% AI server growth is eye-watering, it is heavily reliant on low-margin GPU-dense systems that could face margin compression as competition intensifies and supply chains normalize. HPE’s 148% networking growth is more sustainable, fueled by the Juniper Networks integration, offering higher recurring revenue potential. Investors are conflating massive top-line growth with long-term profitability; I suspect we are nearing a peak in capital expenditure cycles for hyperscalers, which will hit DELL’s valuation harder than HPE’s more balanced portfolio.
If AI infrastructure spending remains in a multi-year supercycle, the sheer scale of DELL's execution will continue to squeeze out smaller competitors and justify its premium valuation.
"Dell's 234% YTD surge and 757% AI revenue growth are real, but the article omits margin trends, AI revenue as a percentage of total sales, and the historical pattern that aggressive guidance raises after one blowout quarter often precede multiple compression."
Both companies are riding genuine AI tailwinds, but the article conflates growth rates with valuation safety—a dangerous move at 234% YTD for DELL. Dell's 757% AI server growth is real, but it's also a narrow revenue slice; the article doesn't disclose what percentage of total revenue that represents or whether margins are expanding or compressing under volume pressure. HPE's 148% networking growth is less flashy but arguably more sustainable if it's tied to edge/hybrid infrastructure rather than a single AI server cycle. The real red flag: both raised guidance aggressively after one quarter. History suggests that's when consensus gets crowded and disappointment arrives fastest.
If Dell's AI server demand accelerates further and competitors (Super Micro, Lenovo) can't keep pace, DELL could justify current multiples for 2-3 more years; HPE's 'steadier' narrative could mask that it's losing share in the hottest segment.
"Dell’s valuation already prices in multi-year AI acceleration that is likely to moderate once initial cluster builds complete."
The article correctly flags Dell's 757% AI server surge and HPE's 148% networking jump as AI-driven, yet glosses over how quickly these multiples compress when capex budgets tighten. Dell now trades at a premium to its historical range on forward earnings while HPE's raised 29-33% 2026 revenue guide still embeds aggressive assumptions about sustained enterprise networking spend. Both names face the same second-order risk: hyperscale customers shifting orders toward custom silicon and direct-to-chip liquid cooling solutions that erode standard server and switch attach rates. Without visibility into 2027 order books, the current re-rating looks priced for perfection.
Continued Nvidia-led GPU shortages could keep Dell's AI backlog elevated through 2026, allowing the stock to sustain its premium even if overall margins compress.
"GPU backlog normalization could trigger earlier multiple compression than anticipated."
While Grok highlights the risk from hyperscale shifts toward custom silicon and liquid cooling, that trend could mean higher system-level demand rather than just eroding attach rates, and may sustain margins if Dell/HPE win more integration services. My concern is the opposite: Nvidia backlog and GPU pricing may normalize faster than feared, compressing Dell's AI-driven revenue quality and triggering earlier multiple compression than peers expect, especially if AI capex cools.
"Aggressive share buybacks and integration risks are masking underlying operational fragility in both companies."
Claude, you’re right about the crowded consensus, but you’re overlooking the balance sheet leverage. Dell is aggressively buying back shares, which artificially supports EPS despite margin compression. Meanwhile, HPE’s Juniper integration is a massive integration risk that could drain cash flow just as the AI cycle peaks. The real danger isn't just valuation—it's the capital allocation trap. If they over-invest in capacity now, they’ll be left with stranded assets when hyperscale demand inevitably shifts to custom silicon.
"Juniper integration outcome—not just execution risk—will reveal whether HPE hedged against capex cycles or doubled down on them."
Gemini's buyback critique is sharp, but conflates two separate risks. Dell's buybacks do mask margin compression—true. But HPE's Juniper integration risk cuts differently: if integration succeeds, recurring software revenue insulates them from capex cycles; if it fails, they're left with a legacy networking business during a slowdown. The real tell: watch HPE's software revenue mix next quarter. That determines whether Juniper was a hedge or a liability.
"Dell buybacks signal cash strength from AI, unlike HPE's integration cash risks that could enable recurring revenue advantages."
Gemini, Dell's buybacks reflect AI-driven cash generation that could sustain EPS even if margins slip, rather than purely masking compression. The unaddressed link is how HPE's Juniper success might actually accelerate Dell's multiple compression by capturing recurring revenue Dell's hardware model cannot match if enterprise spending rotates away from servers toward software-defined networking.
The panelists generally express caution about the current valuations and growth prospects of HPE and Dell, with concerns about the sustainability of AI-driven revenue growth, potential margin compression, and the risk of capital expenditure cycles peaking. They also highlight the risk of hyperscale customers shifting towards custom silicon and liquid cooling solutions.
Potential higher system-level demand and sustained margins if Dell and HPE win more integration services in the face of custom silicon and liquid cooling trends.
Potential margin compression due to normalization of GPU pricing and AI capex cooling, as well as the risk of being left with stranded assets when hyperscale demand shifts to custom silicon.