HPE vs Dell: Which AI server stock offers better value?

Hewlett Packard Enterprise (HPE) and Dell Technologies are emerging as key beneficiaries of the artificial intelligence (AI) infrastructure boom, prompting investors to weigh which stock offers superior value. Both companies provide critical server, storage and networking hardware for AI workloads, but their financial profiles and market strategies differ.

HPE reported a 15% year-over-year revenue increase in its fiscal third quarter, driven by AI-related demand, particularly in its high-performance computing segment. The company’s AI server shipments rose 30% in the quarter, supported by partnerships with Nvidia and AMD. Dell, meanwhile, posted a 12% revenue gain in its latest quarter, with AI server revenue doubling year-over-year. Dell’s AI infrastructure revenue reached $4.5 billion in 2024, up from $2.1 billion in 2023.

Valuations present a divergence. HPE trades at a forward price-to-earnings (P/E) ratio of 14.2x, below its five-year average of 16.8x, while Dell’s forward P/E stands at 18.5x, slightly above its historical average. Analysts cite HPE’s lower valuation as a potential entry point, though Dell’s higher growth rate in AI server revenue may justify its premium. HPE’s gross margins expanded to 30.1% in Q3, up from 28.7% a year ago, while Dell’s gross margins remained flat at 29.8%.

Market positioning also plays a role. HPE’s focus on hybrid cloud and AI-optimized servers aligns with enterprise demand for scalable, on-premise solutions. Dell, leveraging its broader portfolio of PCs and enterprise IT, emphasizes end-to-end AI infrastructure, including servers, storage and services. The company’s recent acquisition of VMware has further strengthened its software-defined infrastructure capabilities.

Analysts remain cautiously optimistic. HPE has a consensus price target of $28.50, implying 12% upside from current levels, while Dell’s consensus target is $180, suggesting 8% upside. Both stocks carry Buy ratings from a majority of covering analysts, though Dell’s higher growth expectations are balanced by its elevated valuation.

For investors prioritizing valuation, HPE may offer a more attractive entry point. Those betting on sustained AI infrastructure growth may favor Dell’s broader portfolio and higher revenue growth trajectory. The choice hinges on risk tolerance and expectations for AI adoption timelines.