Nvidia (NASDAQ: NVDA) now has a market cap of about $2.5 trillion, making it one of the most valuable companies in the world. The stock has enjoyed an incredible rally in the past couple of years, and even though it has been declining in recent weeks, it's still up by an amazing 115% since January.
While there are plenty of opportunities for the leading artificial intelligence (AI) chipmaker's business to grow, because it now trades at such a high valuation that it could take a while for investors who buy it today to reap a high return from the stock.
That's why it's worth considering other AI stocks that may have more upside, and which can benefit from strong demand for Nvidia's AI chips. One stock such stock that looks like an underrated AI investment today is Dell Technologies (NYSE: DELL).
Dell's server business is booming
Computer maker Dell reported some outstanding sales numbers in its fiscal 2025 second quarter. And what was remarkable was that the strong results weren't due to rising personal computer (PC) sales. Instead, it was robust demand for its servers.
In the period, which ended on Aug. 2, Dell's net revenue climbed by 9% year over year to just over $25 billion. And the top line could have been even better if not for its sluggish performance outside of its server business. During the quarter, the company's server and networking revenue grew by an incredible 80% to $7.7 billion. That offset declines in its core client solutions group, where sales were down by 4%.
The company is benefiting from an increase in demand for its servers as businesses look to find ways to accommodate greater workloads due to AI. This is where Dell has a great opportunity to continue to grow its server sales at a high rate.
Its results could get even better
Dell's numbers were good last quarter, but I'm optimistic that they can get even better. Upgrade cycles could be coming for notebooks and PCs as consumers and business customers look to take advantage of AI-powered machines. Research company Gartner forecasts that by the end of 2026, AI PCs will account for all enterprise PC purchases. This year, it estimates that around 22% of PCs shipped will be AI-powered.
Once demand for PCs and notebooks gets going again thanks to that AI tailwind, Dell's overall growth rate could quickly accelerate. The company could be growing at rates well into the double-digit percentages once it's firing on all cylinders with multiple AI-related growth catalysts.
Dell could be a better buy than Nvidia right now
Nvidia and Dell are both potentially good stocks to buy and hold if you're bullish on AI. But Dell trades at just 13 times the company's expected future profits (based on analyst expectations) -- a much cheaper valuation than Nvidia, which trades at more than 36 times next year's earnings.
Dell could also be on the cusp of achieving much better growth numbers in the near future, and buying the stock before that happens could set investors up for some fantastic returns in the long run. It may take some patience given the possibility of a recession in the near future, but Dell may be a terrific AI stock to buy and hold right now.
Should you invest $1,000 in Dell Technologies right now?
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
