Dell Technologies stock has pulled back sharply over the past few days, with its market capitalization falling from $375 billion earlier this month to about $300 billion today. The decline has coincided with a broader retreat among other leading AI infrastructure companies. The question now is whether the sell-off is justified or whether this is a safe opportunity to buy the dip.
Why Dell stock is falling
There are three main reasons why Dell shares are falling this month. The first is ongoing profit-taking after the stock soared to a record high of $595. That peak was up 435% from its lowest level this year and 1,872% from its lowest point in the past five years. It is common for top-performing companies and assets to pull back as investors book profits. This is in line with what we wrote here.
Second, the retreat followed a warning from Gartner that leading artificial intelligence companies will need to announce large impairments by the end of 2030. Such write-downs would affect suppliers like Dell and HP Enterprise, which provide these companies with products such as servers and memory.
Further, concerns about the AI industry are growing, with some analysts warning that the bubble will soon burst. Ray Dalio and Michael Burry have both cautioned that a burst is coming as interest rates remain elevated. The bond market is also flashing warning signs, with yields on debt from companies like Oracle and CoreWeave rising sharply.
These fears explain why other top companies in the AI space are falling. Lenovo Group stock dropped to $25.9, its lowest level since August 7 and 31% from its highest point this year. HP Enterprise dropped to $58.6, down by 20% from the year-to-date high. Other top companies like Broadcom, Oracle, and NetApp have dropped.
Dell Technologies is doing well
Fundamentally, Dell Technologies’ business is doing well, and this trend will likely continue in the foreseeable future. For one, Gartner’s report said that AI providers are spending $1 trillion this year and another $6 trillion between 2027 and 2030. Some of these funds will go to Dell and other providers.
The most recent results revealed that Dell’s revenue rose by 58% in the second quarter to $47 billion as the AI buildup continues. In this regard, its AI server business booked a record $60.9 billion in orders, bringing its total backlog to $95 billion.
Dell’s growth is expected to continue growing in the foreseeable future. The third-quarter revenue is expected to jump by 82% to $49 billion. Its fourth-quarter revenue will come in at $53 billion, bringing its annual figure to $193 billion. Its real figure will be much higher than that since it has consistently beaten estimates.
Analysts are moderately optimistic about the company. Barclays analysts see it rising to $574, while Mizuho sees it hitting $650. TD Cowen has a target of $550, while Daiwa Securities has a target of $625.
Dell stock price technical analysis
The daily chart shows that Dell shares have retreated in the past few days. This retreat happened after forming a double-top pattern and a neckline at $520, its lowest level on October 1.
It has dropped below the 23.6% Fibonacci Retracement level of $480. It has slipped below the 25-day moving average. The Relative Strength Index (RSI) has continued moving downwards.
The stock is yet to hit the target of the double-top pattern. This target is calculated by subtracting the neckline from the double-top, which, in this case, is $76. One then subtracts this from the neckline, meaning that it may drop to $443. A move below that level will point to more downside towards the 38.2% retracement at $410.