Dell vs. HPE: Which AI Stock Wins the Next 90 Days?

If you want exposure to the absolute explosive demand that we are seeing for AI servers and data center infrastructure in this market over the next 90 days, you have a direct choice. You could choose either Dell Technologies, which is the undisputed scale leader for and that is operating an absolute AI server monetization factory right now, or you could choose Hulu Packard Enterprises or HPE. They are the challenger with an underlying AI narrative and earnings power that may be changing faster than Wall Street realizes. Guys, welcome back to Market Signal. Welcome back to today's video. Today, we're not going to do just a generic Dell versus HPE product comparison. We're going to frame a specific 90day trade. Do you pick scale or inflection? Because on one side we see Dell putting up numbers that are absolutely ridiculous from their last earnings report and they gave Wall Street a massive fullear revenue guidance raise but on the other side HPE they are securing massive gamechanging deals for the company and they're expanding its AI networking footprint inside the global data centers. So over the next 90 days which one matters more to your portfolio? Which one's a better investment choice? the absolute scale and execution of Dell or the rapid change in HPE's expectations. And stay tuned to the end because while Wall Street is debating Dell or HPE, there is a hidden infrastructure pick that is quietly building the physical racks that AMD and Open AI are using. And I don't think anybody on no not many people on YouTube or many other influencers are consistently talking about this company. So let's jump in today's video. But let's go through the numbers and ultimately at the end I'll give you my pick on which one I would prefer over the next 90 days and I'll also tell you that hidden infrastructure winner that I think could emerge as well. Make sure you guys hit like and make sure you subscribe to Market Signal. All right, let's start off and take a look at what we actually see with Dell. I want to pull up their Q2 high earning highlights that we saw because I think it basically tells us so many things that we need to see. First, take a look at the revenue on the on the top line there. almost 47 billion in revenue in the quarter. It's up almost 60%. 56% I think it says or 58%. It's pretty small on my screen there. 58%. But also look at the operating income. It's up over 200%. Diluted EPS is up close to to 275%. So Dell's latest earning report in my opinion was a masterclass and AI infrastructure execution. Look at the box that I've highlighted on the right there. They have generated almost 16 and a half billion in AI optimizer AI optimized server revenue in that quarter alone. And guys, the other thing that gets me excited about Dell is they are they have received over 60 billion in new AI server orders. Their total AI backlog right now stands at about 95 billion. And take a look at how that has ramped up over the few quarters. If you look at the box below, you can see just the back orders of how it has ramped up to 95 billion. That is showing you a company that is trying to meet the demand in the market. And look at all of the partners that they have in their ecosystem over there. So many of the names that we invest in that obviously we know in this space because they are critically important whether it's Nvidia, AMD, OpenAI, Palunteer, Meta. I won't go through the whole list, but the reality is Dell is heavily uh heavily embedded in this space with significant partnerships and they're rising to meet the demand. As I said in the beginning, they are the absolute leader right now operating a monetization factory for AI servers and that backlog shows you to you as well. But take a look at their guidance as we move forward. I think this is another piece if you're interested in investing in Dell that is an exciting piece because they didn't just beat estimates. They raised their fullear revenue guidance as well by 25 billion and they took the total target to 192 billion and they expect Q3 AI server revenue alone to hit 19 billion. You can see it on the the box that I've highlighted on the left. and they're increasing their earnings per share to 25 and a half 25 point uh $25.50, excuse me. So, think about what that those numbers mean for this company. They are seeing their full year revenue AI server revenue go to 74 billion. It's a 3x over a year to year from before from the prior year. That just shows you the amount of demand in the market, how Dell is meeting that market, the partnerships they have across the market. Dell is no longer just a PC and enterprise server company. It is transformed into a high thoroughut AI factory in today's market. And the beautiful thing about Dell for all of us on the channel that are memory investors as well is there's a huge second order that comes along with them that makes Dell so formidable. So the supply chain pullth through is that second order. On their earnings call, Dell explicitly highlighted that HPM and enterprise DRAM remain their primary component bottlenecks. But as inference work uh workloads scale, every AI server that Dell ships is dragging along massive of orders of not only HBM and DRAM, but massive orders of traditional enterprise CPUs, high density storage arrays, as well as custom liquid cooling infrastructure. So an investment in Dell gives you the entire AI hardware food chain in one single stock. You have compute with their relationships not only with Nvidia and AMD and others but you have memory and storage. You have networking and enterprise integration that comes along with Dell. So Dell gives investors in my opinion one of the largest scale exposures to the AI infrastructure spending outside of the semiconductor layer. So if you want one of the cleanest and clearest longscale proxies for raw AI capital expenditure, Dell has proven that it can convert customer demand into recognized cash flows at an incredible pace in the market right now. So if you look at those numbers, you might say, Kevin, why would I even pick HPE if Dell is operating so so extraordinarily well right now in the marketplace? If Dell's numbers are so strong, why pick it? Because in stock market investing over the next 90day horizon in particular, the rate of change and expectations often matters more than the absolute scale. So for years, HPE or or Hulipackard Enterprises was categorized as a legacy enterprise server vendor that has been burdened by low margins. But over the past few months, HPE's structural trajectory has undergone a dramatic shift. Let's take a look at some of those numbers that we're seeing in the market for HP right now. For HPE right now, if we look at their Q3 earnings, you can see the first thing that jumps out to me is just record. Look on the right side in the highlights. How many records do they set for the company just in this last quarter alone? Net revenue for the quarter was just over 12 billion. It's up 34% year-over-year. That's a record above guidance. Their gross margins, remember this was a company that was plagued by low margins, 40% gross margins, is up 10 percentage points, a record which they achieved through pricing, discipline, and favorable mix. If you take a look at their offer operating profit, that is a record. Earnings per share was up over 152% for $111. It is above guidance and a record for the company. Free cash flow of over a billion dollars. It is year-over-year growth of 200 million. It's a record in Q3 driven by the record non-GAAP operating profit. So they raised their fiscal 2026 non-GAAP diluted earnings per share guidance by 40 to $3.75 to $3.85. So those are incredible numbers for the company. But the thing that makes me excited too with HPE is the networking side of their business. If you take a look at this graph here, it breaks out the customer segments or the the operating segments for HPE. networking achieved just under three billion in the quarter. It's up 75% over the prior year at an operating profit of 600 million and an operating margin of 22%. But look at the highlight. It's a they achieve they received record orders of which was up 36% in the quarter. The revenue was up 10% and it normalized with strong operating profit. And guys, the why I'm excited about that, if you remember the acquisition that Hilo Packard had in I think in June of 2025, it was to they acquired Juniper Networks. And if I highlighted on this on the graph here, the three big products that they acquired, they embedded into their ecosystem from Juniper that is paying off on their balance sheet right now. So, it is the the QFX switches, it's the PX PTX routers, and obviously the XRX next generation firewalls. this in addition to their Aruba uh switches are making a significant impact in the market and this is one of the reason I get excited about for HP in the future and why you know I think they are they do have this inflection point in the company because take a look at what we're seeing right now from a networking perspective you know when they when that Juniper integration came forward I mean HP said in their earnings that moving forward they raised their full fiscal year 2027 networking segment growth into the high teens I think 14 to 17%. And they're carrying higher margin operations now into the mid20s. And you topple that. Let's take a first take a look at down below that I've highlighted because this is a big piece also for HPE. They signed a gigawatt scale deal with Oracle for one of the industry's largest AI cloud infrastructure buildouts. But look at data center. Now if you look at the data center is highlighted in the left there in the quarter was about a 400 million. It was actually down by 6%. But what gets me excited about is if you look to the right, they have record demand right now. The orders were up 36% in the quarter. And we're seeing that the data center and switching and routing orders up high double digits year-over-year. If you go down further into the box, the next bullet point down, they have increasing cumulative network increasing cumulative networks for AI orders guidance. They're they're increasing that guidance from two and a half billion to three billion for for end of this fiscal year 2026 and their cumulative orders have reached 2.2 billion. So they are transforming right now. They are integrating Juniper at a level that you know many people gave them criticism that they didn't do it fast enough. I start I think we're starting to see that get integrated really nicely and you see it built into the forward guidance for the company as well. If I pull that in, take a look at what they're guiding for for fiscal year 2027. They're guiding for revenue growth in between 13 and 17%. Networking right below that in small print you could see it's guiding for 14 to 17%. Earnings per share is between 16 and 20%. Free cash flow will be over 5 billion but look at the operating margins. Their networking will be high mid to high 20%. PE is going to be 13 to 15%. It's a framework grounded in record backlog and durable demand. So overall, I think when I take a look at this, it's clear to see that HP is suddenly no longer just selling commodity servers into the market. So the narrative is changing for this company. It's changing from a legacy server hardware to a high margin AI networking and customer rack architecture. And that's not the only piece. There's a big story that broke with HPE last week that it didn't have a chance to cover on the channel. You see it here. It was broke, I think, middle of the week last week, right around when Micron dropped their earnings. So, obviously my channel got flooded with Micron earnings uh information, but HPE secured a $1.2 billion order from Vulture for its first AMD Helios AI rack system. And take a look at some of the details. It's saying here HP enter, they announced a major partnership or an order from Volter. It is designed to address the surging global demand for high performance AI compute and AMD's Helios system. We know it combines rack scale compute, draco liquid cooling and purpose buildup scale networking that'll be powered by HPE Juniper networking technology. The also thing about these scales we come to the next slide. Why I love this also as a memory investor is because we know that each Helios rack contains or they integrate 72 AMD's Instinct MI455X GPUs, AMD's Epic Venice CPUs. They also have HPE's Juniper networking that QFX that scale that Ethernet switch tray in there. So the next line after that that I don't have highlighted it says it's built on a open standard like a UA link or over a Ethernet and is integrated the integrated stack provides memory capacity high bandwidth high bandwidth interconnects energy efficient and energy efficiency required for trillion parameter AI models. This is a big deal for memory for networking across the board. So this also is a huge signal for memory investors. And they go on to say that our work with AMD and HPE enables us to bring Helios rack scale compute and scale up networking online for customers faster. That came from the CEO CEO of Vulture. So this is also a big acquisition and partnership for for HPE. So it takes us kind of to the next 90day tension that we see in the market. Is it scale or is it inflection that you as an investor would be more interested in? You can see the picture that I had developed. It looks at the primary thesis, the AI backlog, the key differentiator and the 90-day key metric. So with Dell, you are buying absolute low momentum right now in the market. You know, they have a $95 billion backlog and that exists and that is real. The risk with that though is conversion timing. If memory shortages or if power availability delays, if any of that has an impact on server deployments, then Dell's revenue targets could experience minor quarterly slippage. In addition, Wall Street already expects perfection from Dell. So, as we know, as the higher expectations become, the harder it becomes to move the price of the stock even when the you deliver extraordinary results onto the street. And that's probably the same issue we see with Micron right now. they expect just massive uh earnings. They have huge expectations. So when the company delivers it, it's hard for to see momentum really push the stock further. And that's kind of the position I feel Dell is in right now as well. But if you look at HP, HPE on the right side, when my opinion, you would be buying or you could potentially be buying a rerating opportunity for this stock because HPE has faced investor skepticism regarding AI server gross margins, the integration friction that they've had with Juniper in the fast and in past. But in my opinion, guys, that creates a pro positive setup for this stock. If HPE demonstrates over the next 90 days that its Juniper networking integration is expanding its gross margins while ramping up that 1.2 billion dollar deal with Volter, the multiple expansion for HPE has the potential to outpace Dell on a percentage basis. And then let's take a look at a few other metrics that I think we have to consider when we're we're choosing between these two companies because they are absolutely not the same from a scale perspective. the impact in the market right now. But in my opinion, I think this table also gives us opin gives us a a view for the greatest potential potential shift in investor consensus because I will tell you now HPE is the stock that I would go with moving forward as the pick for the next 90 days. And here's why. I think Dell dominates in absolute scale. Just look at its price. It's at, you know, $562.52. Their market cap is almost 360 billion we'll call if you compare that to a market cap of HPE of just under like just just over 90 billion significantly different scale overall and the the growth year to date the revenue growth is also very different you can see down below revenue growth for for Dell was 49% year-over-year 26 point 26.6% 6% for HPE year-over-year. But I think where we get into a little bit of a more of a compelling 90day trade setup for me is looking at the discounted forward PE. You got a 16.7x4 PEP compared to Dell, which Dell is sitting at a 21.3 and also the free cash flow piece. You have four and a half% of free cash flow yield, which is a much more attractive narrative for me from an inle inflection perspective. I'd rather rather than paying up for Dell's fully recognized momentum that they have in the market, leaning towards HPE captures a potentially repricing catalyst that is being driven right now by that 1.2 billion AMD Helios AI platform deal with with regarding Vulture and the accelerating high margin Juniper AI networking integration that they have. And guys, that expanded Oracle infrastructure footprint, it is giving HPE a clearer path to beat evolving Wall Street expectations over a shorter 90-day catalyst window. So, that's my opinion, guys. I would lean towards HPE over the next 90 days, but I did want to give you that hidden stock that we talked about. The one I'm pulling up is actually not my pick, but many people would say, Kevin, if you want a hidden stock that gives us exposure to this exact AI server, the rack boom, and you want to avoid the original equipment maker kind of the wars that we're seeing or that headline alto together, many investors would probably point to super micro computer and I am an investor in super micro computer. If you remember back in March, I actually recommended this stock on this channel. It was trading about just about uh just under $22 at the time. So, we've seen significant increase at that from that time in this stock. But the stock continues to deal with ongoing audit delays, you know, financial filing extensions, compliance overhang. So, if you're looking for a cleaner, high growth alternative without some of the the overhangs or concerns with super micro, then I would actually lean towards my pick, which is Celestica. Now Celestica that right now they're not actually $551 a share. That's Canadian dollars. Sorry guys, they're trading at about $3.87 right now, but they are on they've had significant growth. If you look at the bottom, whether that's the last day, the week, the month, you go out, this company has been on fire. It has been growing. It is a great pick in my opinion. If you're looking for something with a cleaner high growth alternative in this marketplace that is heavily involved, if you take a look at some of the reasons on the next one, I'll go through my reason I have these picks because while Dell and HP fight for that front-end kind of brand market share, Celestica is the primary electronics manufacturing services and design engine behind the scenes. Celestica is the direct design and manufacturing partner to co to co-build AMD's Helios AI rack platform. The exact platform that HPE is deploy deploying for Var. They also have been selected to manufacture the custom AI rack architectures developed between Broadcom and OpenAI for their custom accelerator rollout. And guys, they dominate the manufacturing of 800G Ethernet switches. And we know the 1.6 6 terab networking platforms are ramping up right now in the marketplace. And if we also think about Celestica from another fundamental perspective, they raised their 2026 revenue guidance to just over 20 billion. It was a 65% increase year-over-year. So in my opinion, I believe they trade at a valuation discount relative to its pure AI exposure in the marketplace right now. So whether HPE or Dell wins in the market, Celestica is silently manufacturing the liquid pool high density hardware that is powering the entire hardware ecosystem or excuse me that's powering the entire hypers scale ecosystem. So if you want to pick and shovel play behind the HPE AMD Helios thesis I would recommend putting Celest Celestica on your radar as well. So that's my 90-day breakdown between these two original equipment makers that battlefield that we see right now. Dell that is your pick if you want raw scale unmatched execution. HBE though they are changing they are right now undergoing a rapid rate of change in margin inflection and remember celestica as I said is the hidden structural manufacturer play in my opinion right now in the market that you should have on your radar as well. So what's the strategy that you are looking at? Do you agree with my pick that HBE over the next 90 days is a more could be a more interesting investing uh catalyst for you? Or do you think Dell's $95 billion backlog just wins the day overall? Drop your comments below. Let me know if you agree with me, if you disagree me with me, or is there another pick in this space related to AI server buildout? Guys, I hope you enjoyed the video and I'll see you on the next