This AI Stock Rally is UNSTOPPABLE. Here's WHY.

Could Dell stock be a massive beneficiary of the move to openweight models? Even Nvidia is now getting into supporting openweight models. Of course, OpenAI and Ananthropic probably don't want to get into openweight models, especially since they make a whole lot of money on their closedweight models. Now, to be clear, the information just reported that Deepseek has annualized revenue of probably somewhere around 400 to600 million US. If you think about that, that is a drop in the bucket compared to the annualized revenue of the $65 billion that Enthropic has. But to me, what it shows is how much potential there is to move frontier level AI to openweight and how could Dell potentially be a massive beneficiary of those openweight models. Really important we're going to talk about in this first quick understanding regarding openweight just so we have a baseline here. It's different than open source. Okay, open source would be like here's everything on how our AI works. Instead, with an openw weight system, you're really getting a pre-programmed software set that you can then fine-tune yourself on your own servers and then nobody sees your fine-tunings or your adjustments. The benefits of that are you can run that on your own compute. You don't have to pay a lease to anyone. You could run it on your own hardware. You could run it locally. You could run it securely. the way you secure it probably does mean there's there's got to be some more cyber security spending on endpoint management and server management for people on location but Dell is very interestingly positioned to take advantage of exactly this transition to open way models now I'm not exposed to Dell so I don't want to come across as a shill for Dell I actually think the valuation has gotten a little ahead of itself because of the momentum that's come in mostly post this claude explosion But I get it because let's actually look at some of the details. This is the earnings call from Dell. The last earnings call I have. They've got another um earnings report coming out in about 6 days. But this is really smart. Our Dexite Agentic AI solutions help enterprises run productionready AI locally supporting use cases like coding research and secure private assistance while keeping sensitive data and IP onrem. This is like so freaking brilliant. Basically, Dell is saying, "Look, man, you want to run AI locally? You want to run these Chinese models, the Quen, the Deep Seek, the Moonshot, or Nvidia's openweight model? No problem. We will sell you the GPUs, the CPUs, the rack, the switch, the UPS, not the shipping company, the battery. We'll sell you the whole kitten kaboodleoodle. just pay us and we'll come install it for you and then you'll be ready to use our production ready software which they call Dexside Agentic AI solutions. So you could start running AI yourself right away. That package is actually really really smart because anyone can just go buy a GPU, a 5090, anybody can go buy uh you know an RTX 6000. Anybody could frankly call up Nvidia and get on the sales calls uh with them and start trying to put in orders for the multi-million dollar frontier level racks if you want. Good luck getting an allocation, but you might be able to. Dell has the supply to make that easy for their customers to where they say, "Look, we'll just go plug in this whole rack for you and it'll come with the hardware that you want. We've already secured all of that supply." And they call it a trifecta. So the trifecta they refer to is uh GPUs to train, CPUs to operate Agentic AI, NAND to store and they call it a trifecta of bullishness and they actually brag about how they are able to onboard so much enterprise and they're seeing more customers trying to get this hardware. They're seeing budgets that are growing uh and they have the supply necessary to sell to those people. That's their argument. Obviously, memory pricing, which they talk about somewhere in here, uh is always going to be a margin issue. Uh memory prices continue to rise. I mean, it's not always going to be a margin issue. It's going to be a margin issue for the near-term future. But they argue that they're seeing a lot of demand from enterprises, and it's getting more extreme, not less. They grew their customer base 50% over just the last six months. 50% more customers ordering these sort of onrem hardware sets. uh and they don't sell to the hyperscalers, they sell sovereign, neocloud and enterprise. And that's I think where AI is going. You know the hyperscalers are trying to sell to open AI and anthropic. Everybody else is trying to work with the enterprises like how can you use practical AI whether you're creating cancer therapeutics like Mona or maybe you're a company like you know I don't know meet Kevin and uh meet Reinvest right like obviously you already know this. We've got a coupon code expiring J-Hole on Friday. But I mean, we run our own GPUs and you know, we've had to set up the Linuxbased servers and do all that. It's hard. Dell kind of does a lot of that for you and enables you to run your own data. So, we don't have to give our proprietary data and weights and algorithms that we use to help determine where there's a good deal in real estate. We don't have to give that data to Claude or OpenAI. That's exactly what Dell is trying to enable for people. We're going to make it easier for you to spend money on servers and then run your own AI, which is brilliant. I'm a big fan of it. Speaking of which, we are getting rid of the lifetime access to the Reinvest AI. It's going to be going to a monthly uh annual recurring revenue style subscription. Uh so, if you want to lock in that lifetime access, make sure you use that coupon code J-Hole before it expires on Friday. We'll also have an expiration simultaneously for the Meet Kevin membership on Friday. But let's keep focusing on Delph right now. Uh, and if you have any questions about those, by the way, just email us at staff@meke.com. Okay, so what do you have right here? You've got uh them saying more customers are looking to get access to this technology. And there was really this explosion in customers over the last 6 months, which I attribute to this claude co-work moment that we had in March and into April where people are like, "Oh my gosh, this is it. The coding revolution, right?" That does create some of a risk factor because it does mean the stock is potentially hyped up right now because they have the supply for enterprise companies that are like jumping on the bandwagon postclaw. You know, for example, we've been building out our AI stack for the last year, but post postclaude in in March, you know, the GPUs that we bought a year ago have doubled in price, [laughter] right? So, like where are you in the hype cycle? I I I don't know, right? That's obviously going to be a risk factor here, but I really do believe Dell is going to be a huge beneficiary of uh openweight models, especially since it allows you to protect more of your data uh on prem. I mean, look at this line. We continue to expand Dell AI factory ecosystem with partners including Nvidia, Google Cloud, OpenAI, SpaceX AI, Service Now, Palanteer, Crowdstrike, blah blah blah. And we are running Gemini models on prem for customers who want confidential compute so customers can run AI closer to where the data uh is meeting data residency privacy sovereignty requirements, blah blah blah. There are a lot of hospitals for example that have ho hippo requirements. There are financial firms that have to prove that their data is secure to FINRA. There are banks that have to verify that their data is secure and their customers data isn't getting screwed. In my opinion, that actually drives more of a need for cyber security endpoint management. Bullish, Net, uh, you know, Cloudflare, Crowd Strike, Sentinel One, but Dell is a big winner here. We got to give them credit where credit is due. And so, let's do a little bit of, uh, number math over here on Dell. First of all, their balance sheet, I call it yellowish. Okay, I've got, if I put together all of my short-term assets, I have enough money to pay my $61 billion in bills. They have a lot of bills to pay because they buy a lot of, you know, supply and uh then then they need to turn around and sell the stuff, but they are selling the stuff. They've got like over a $50 billion backlog of stuff that they got to sell. So, I'm not so worried about this. $27 billion of long-term debt. It's not great. Their free cash flow is decent. They've got a It's actually surprising. They got a 4% cash flow yield because it's a $300 billion company, which even after its runup into the 400s. It's um you know, it's still not that big of a company. Their margins aren't great. And that's probably what kind of keeps like a boot on their neck, if you will, but they're doing some stock buybacks. Uh they're only issuing a tiny little bit of debt here, 325 million versus the 2.6 billion in dividends and repurchases they did. So cash flow is fine, too. If we look at the income statement, this is where you're going to understand more about the company. Their margins are compressing. AI server margins suck. They're like four to 7%. They're really bad. So the more of this AI stuff they sell, the worse their margins get. You could literally see year-over-year their margins have declined from 21% to 17%. So their margins are in decline, but that doesn't really matter because their operating income is skyrocketing because their SGNA and their R&D doesn't really move. Like you increased OPEX 9%. which basically means any increase in gross profit, which is this number right here, this $7 billion from $5 billion, that just flows straight to the bottom line effectively. And so their net income has skyrocketed like 3x. So their net income is exploding. Their projected EPS is uh $18.73 for the uh end of the year ending uh January 2027. Their growth projection sits at about 16% growth per year, which actually means they're trading for about a 1.56ish peg right now. Their net margin kind of sucks though, right? They're only bringing like 7 to 8% or whatever here. 7 7.8% to the bottom line. That's like a defense stock, you know, Loheed Martin kind of margins. So the the margins suck and they're kind of worsening. But even though the margins suck, they're doing so much more freaking business that their EPS just keeps growing. Uh, and so that's where you have to look and say the growth is good. You know, they're growing that earnings per share at expected to be 16% per year, but what multiple do you assign to them? If you assign them a 1.56 multiple, they're fairly valued today. If you assign them a Loheed Martin kind of multiple of like 1.2 on a PEG basis, they're overvalued. You know, at at at 1.2 2 divided by 1.56 they're overvalued by 23%. So a little aggressive if which I don't think you should because I don't think structurally they're ever going to get to these higher margins. If you really want to be mega bullish on them, you could argue that maybe their margins will expand and they'll be able to justify uh you know like a two peg or something in the future which at a two peg you know they'd have upside of about 30%. So, I think Dell is going to be a major beneficiary of the move to open weight. I'm really bullish on what's going on with Dell, but I think right now they are a little aggressively priced. I think their valuation isn't the most ideal. Balance sheet is yellowish and they've got pricing power right now because they've got supply. They've also gotten really hyped up after the Clawude moment. So, I think there'll be better opportunities to buy it. So, in a weird way, I'm like bullish on what they're doing. I'm just bearish on the timing for acquiring them. Our stock AI, for example, which you, you know, can get in the Meet Kevin app, uh, indicates that their pricing power is mid-range, balance sheet yellowish, kind of like what we analyzed there, but their valuation's a little aggressive right now. I got a red flag on valuation and a red flag on moving average. Moving average, because obviously the stock has done exceptionally well. So, like I guess the way I would bottom line it is I love what [music] they're doing. They are selling the picks and shovels for Enterprise AI and I am convinced much more spend is coming to Enterprise AI. Just don't like their pricing here. I personally wait for a better opportunity, but I couldn't be more bullish on the move towards Enterprise AI. So, there's my take on Dale. Why not advertise these things that you told us here? I feel like nobody else knows about this. >> We'll we'll try a little advertising and see how it goes. >> Congratulations, man. You have [music] done so much. People love you. People look up to you. >> Kevin Papra there, financial analyst and YouTuber. Meet Kevin. Always great to get your take.