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The S&P 500 is the most widely followed benchmark of the stock market in the U.S., comprised of the 500 largest companies in the country. Given the breadth of its component companies, it is considered to be the most reliable gauge of overall stock market performance. To be considered for membership in the S&P 500, companies must meet the following requirements:
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Be a U.S.-based company.
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Have a market cap of at least $8.2 billion.
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Must be highly liquid.
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Must have a minimum of 50% of its outstanding shares available for trading.
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Must be profitable according to GAAP in the most recent quarter.
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Must be profitable over the preceding four quarters in aggregate,
Dell Technologies (NYSE: DELL) just became one of the latest additions to the S&P 500, joining its ranks on Sept. 23, one of only 11 companies added to the index so far this year. Since the beginning of 2023, Dell stock has surged 193% as the rapid adoption of generative AI has caused investors to take a fresh look at the company's hardware and IT services solutions. Its performance is even more pronounced over the past decade, as Dell's revenue has grown 104%, net income has soared 1,440%, and the stock price has surged 879% (as of this writing).
Despite its incredible run, some on Wall Street believe there's much more to come. Let's look at the opportunity ahead and why Dell stock is a buy.
Stepping into the fray
Dell is something of a household name and has been supplying computers and IT solutions for more than four decades -- and was quick to recognize the opportunity represented by AI. Earlier this year, Dell unveiled the Dell AI Factory -- powered by Nvidia's gold standard AI chips. The AI factory is a suite of products, services, and solutions optimized and tailored to handle AI workloads. Dell not only has hardware designed to meet the rigors of AI but can also help businesses of all sizes accelerate their adoption of AI.
Dell has also partnered with Microsoft and introduced a comprehensive portfolio of Copilot+ AI-powered PCs, workstations, laptops, and notebooks. This gives the company yet another way to profit from the ongoing adoption of AI.
The evidence is clear
The impact of the AI revolution has begun to show up in Dell's results. During the company's fiscal 2025 second quarter, ended Aug. 2, net revenue accelerated 9% year over year to $25 billion, while diluted earnings per share (EPS) of $1.17 surged 86%.
Dell's infrastructure solutions group -- which includes servers and networking equipment -- delivered record revenue that grew 38% to $11.6 billion, driven by surging demand for servers with the computational horsepower to handle AI. This was partially offset by tepid results from the company's client solutions group -- which includes consumer PCs and commercial workstations -- which was down 4% year over year to $12.4 billion due to weak demand for PCs.
