To The Moon

$Dell Technologies Inc.(DELL)$'s latest earnings report (Q3 Fiscal 2026, released November 25, 2025) offers a definitive counter-argument to the "AI bubble" skeptics, even if the immediate stock price reaction was volatile.

Dell stock rallied ~4% on Monday leading into the earnings, likely anticipating good news. In the immediate after-hours trading on Tuesday, we saw DELL gained 3.48% in after-hours trading at time of this writing.

In this article I would like to share the breakdown of why the "AI Bubble" narrative is taking a hit and what this means for the sector's recovery.

The "AI Bubble" Narrative: Slammed by Hard Data

The core argument of the "AI Bubble" thesis is that demand for AI hardware is hype-driven and will evaporate once companies finish "testing." Dell’s report directly contradicts this with accelerating real-world orders.

Explosive Order Growth: Dell reported record AI server orders of $12.3 billion in Q3 alone. To put that in perspective, they booked nearly as much in one quarter as they did in the entire first half of the year.

The Backlog is Growing: The AI server backlog (orders received but not yet shipped) grew to $18.4 billion. This indicates that demand is outstripping supply—a classic signal of a secular growth cycle, not a bursting bubble.

Pipeline Multiples: COO Jeff Clarke stated their sales pipeline is "multiples" of the backlog, suggesting demand is widening beyond just the massive "Tier 2" cloud providers to enterprise customers.

Verdict: The "demand cliff" (bubble bursting) is not happening. If anything, the infrastructure build-out is re-accelerating.

Why the Stock Did Not Explode Higher (The "Bubble" Nuance)

If the numbers were so good, why did the stock potentially not surge in after-hours?

High Expectations (Priced In): The ~4% rally on Monday meant the "beat" was already partially baked into the price. In a high-momentum sector, "good" often isn't enough; investors want "perfect."

Revenue Miss vs. EPS Beat: While Dell beat earnings expectations (Adjusted EPS of $2.59 vs. $2.48 est.), their total revenue of $27.0 billion was slightly below some aggressive whisper numbers (though up 11% YoY).

Margin Anxiety: Investors are hyper-focused on margins. AI servers are expensive to build but historically have lower percentage margins than traditional servers. The market is watching to see if "profitless revenue" becomes a trend. Dell's operating income rose, which is a good sign, but the fear lingers.

We are seeing investor sentiment remain neutral even though Dell have showed earnings beat.

Are We Going to See a Recovery in AI Stocks?

Dell's results are a bullish signal for the broader AI hardware ecosystem, suggesting a selective recovery is likely.

Positive Read-Through for Nvidia (NVDA): Dell’s record orders directly translate to demand for Nvidia GPUs (like the H100/H200 and Blackwell chips). If Dell is selling $12B+ of servers, they are buying billions in chips. This reinforces the floor for Nvidia.

Broadening Rally: The "recovery" might shift from just chipmakers (Nvidia/AMD) to infrastructure builders (Dell, HPE, Vertiv) who are actually deploying the hardware.

Differentiation: The market is becoming more discerning. It will likely reward companies with backlog execution (shipping the products) rather than just "AI announcements." Dell’s ability to ship $5.6B in AI servers this quarter proves they can execute.

Next Step

The "AI Bubble" narrative regarding demand has been slammed again; the appetite for compute is real and growing. However, the stock price volatility suggests the "valuation bubble" is still a factor—investors are nervous and quick to sell on anything less than perfection.

In the next section, we will looked at the following comparison and analysis highlight how the AI hardware landscape is shifting, specifically regarding Dell's massive backlog, $Hewlett Packard Enterprise(HPE)$'s position, and the deteriorating outlook for $SUPER MICRO COMPUTER INC(SMCI)$.

Head-to-Head: Dell vs. HPE (AI Backlog & Revenue)

Dell has established a commanding lead over its traditional rival, Hewlett Packard Enterprise (HPE). While HPE is growing, Dell is capturing the lion's share of the enterprise AI market.

*Note: Dell's data is from Nov 25, 2025. HPE's latest available data is from their Q3 report (Sept 2025); they are set to report Q4 earnings on Dec 4, 2025. Even accounting for the time gap, Dell's numbers are roughly 3-5x larger.

What the Ratio Tells Us:

Dell (3.3x): A ratio of 3.3x indicates that for every $1 of AI servers Dell shipped, it has nearly $3.30 in orders waiting. This massive "demand buffer" suggests Dell has locked in revenue visibility for the next 3-4 quarters, insulating it from short-term fluctuations.

HPE (2.3x): HPE's lower ratio and significantly smaller backlog ($3.7B vs. Dell's $18.4B) suggest it is winning "spillover" demand but is not the primary partner for the massive Tier 2 cloud builds that Dell is securing.

Impact on Super Micro Computer (SMCI)

The most critical takeaway from Dell's report is not just that Dell is winning, but that SMCI appears to be losing its crown. Dell's results confirm the "Nvidia Diversion" theory—that Nvidia and customers are actively shifting orders away from SMCI due to its accounting and governance troubles.

Here is how Dell's report specifically impacts the SMCI outlook:

The "Flippening" Has Happened

For the first time in this AI cycle, Dell’s quarterly AI revenue ($5.6B) has surpassed SMCI’s ($5.0B).

SMCI's Stagnation: In its most recent quarter (Q1 FY26, reported Nov 2025), SMCI's revenue declined sequentially to $5.0 billion (down from $5.8 billion), as customers paused orders amid delisting fears and the auditor resignation saga.

Dell's Acceleration: In contrast, Dell's AI revenue surged to $5.6 billion. This signals a direct market share transfer from SMCI to Dell.

The "Trust Tax" is Real

SMCI's accounting troubles (delayed filings, auditor resignations in late 2024/early 2025) created a "trust vacuum" that Dell has filled.

Supply Chain Diversion: Reports indicate Nvidia has prioritized allocating constrained Blackwell GPUs to "stable" partners like Dell to prevent supply chain risks. Dell's record backlog proves they are getting the chips that arguably would have gone to SMCI a year ago.

Enterprise Preference: Corporate CIOs (Chief Information Officers) are risk-averse. They are choosing Dell's slightly more expensive but "safe" supply chain over SMCI's uncertain future, even if SMCI has technically regained compliance.

Valuation De-Rating

The "AI Bubble" narrative often relied on SMCI's hyper-growth (200%+ YoY). With Dell now showing it can grow AI revenue faster than SMCI while paying a dividend and buying back shares, investors have less incentive to take the risk on SMCI. SMCI is no longer the "only game in town" for high-performance AI servers.

Dell's earnings are a confirmed bearish signal for SMCI. The data shows that the "accounting troubles" caused lasting business damage, allowing Dell to overtake SMCI in quarterly AI revenue. The recovery in AI stocks is likely to be bifurcated: "Safe Infrastructure" (Dell, Nvidia, Vertiv) will likely outperform "High Risk/Turnaround" plays (SMCI).

Summary

Dell recently reported its latest quarter roughly in line with expectations: revenue around US$27.01 billion vs analysts’ ~US$27.1 billion consensus.

Crucially, demand for AI-optimized servers remains very strong. Its infrastructure segment — largely AI servers and related hardware — continues to power growth.

On the back of robust AI infrastructure demand, Dell raised its long-term guidance: now expecting 7–9% annual revenue growth (versus prior 3–4%) and boosting its adjusted earnings-per-share growth target from ~8% to at least 15%.

That bullish stance on AI infrastructure helped push Dell’s stock up 3.48% after hours.

This does not fully “burst” bubble talk — but it does challenge a purely speculative, hype-driven version of the AI rally:

Dell’s results suggest real enterprise and infrastructure demand for AI hardware (not just lofty valuations). The fact that a major hardware provider is backing stronger guidance based on actual orders/backlog lends credibility to parts of the AI boom.

On the flip side: the sector remains risky. As some recent reporting argues, high demand for servers doesn’t automatically translate to healthy long-term margins — especially as costs (e.g. memory, components) remain elevated.

And broader caution persists: some investors are already questioning valuations of “AI-hype” stocks in aggregate, warning that many companies in the space remain speculative bets.

Possibly — at least for infrastructure-linked firms (like Dell) that deliver real hardware or services supporting AI deployments. Their revenues look more rooted in actual enterprise demand. But:

Stocks whose value mostly rests on future promises (software, startups, long-term AI potential) remain vulnerable.

Macro factors (cost pressures, competition, supply constraints, demand cycles) could still derail momentum.

We may be seeing the beginning of a rotation — from speculative “hype-wear” into more grounded infrastructure beneficiaries. But it is unlikely to be a smooth ride: expect volatility and divergence within the “AI” bucket.

Appreciate if you could share your thoughts in the comment section whether you think we would continue to see volatility in the AI chips and tech stocks movement .

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.