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:

• Be a U.S.-based company.

• Have a market cap of at least $8.2 billion.

• Must be highly liquid.

• Must have a minimum of 50% of its outstanding shares available for trading.

• Must be profitable according to GAAP in the most recent quarter.

• 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.

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Management boosted its full-year outlook and is now forecasting revenue of $97 billion at the midpoint of its guidance, representing year-over-year growth of about 10%.

Furthermore, Dell’s future looks bright. Many PCs that were purchased during the pandemic are coming to the end of their useful lives. The resulting pent-up demand, combined with the release of AI-enabled PCs, is expected to boost growth over the next couple of years.

Indeed, global PC shipments finally turned positive this year, up roughly 2% year over year in the first quarter and 3% in the second quarter, according to data compiled by market intelligence firm International Data Corporation. This comes after eight consecutive quarters of year-over-year contraction. The PC market is expected to grow by 5% in 2024 and 8% in 2025, according to research firm Canalys. As one of the largest suppliers of PCs in the world, Dell will no doubt benefit from this recovery.

Furthermore, the AI revolution is only beginning to take shape, and the opportunity ahead is enormous. The worldwide AI market was estimated at $2.4 trillion in 2023 and is expected to surge to $30.1 trillion by 2032, a compound annual growth rate of 32%, according to Expert Market Research.

Given the magnitude of this opportunity and Dell’s location at the crossroads of consumer and business computing, the company is well-positioned to profit from the accelerating adoption of AI.

The future is bright

Don’t take my word for it. Of the 21 Wall Street analysts that covered Dell stock in August, 81% rated it a buy or strong buy and none recommended selling. Furthermore, on the eve of its admission into the S&P 500, TD Cowen analyst Krish Sankar boosted his price target to a Street-high $218. That represents potential upside of 85%, compared with Monday’s closing price.

While the analyst acknowledges that server demand for the current quarter could be flat — which would likely weigh on investor sentiment — the long-term picture is bright, as evidenced by Dell’s increased full-year outlook.

For investors looking to cash in on the AI revolution without betting the farm, you’ve come to the right place. Dell stock is currently selling for 21 times earnings, a significant discount to a price-to-earnings ratio of 30 for the S&P 500.

Given the recent run-up in its stock price, Dell will no doubt be a bit volatile from here. That said, the company is well-positioned to benefit from the accelerating adoption of AI, which would profit its shareholders along the way.

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Danny Vena has positions in Microsoft and Nvidia. The Motley Fool has positions in and recommends Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Meet the Newest Stock in the S&P 500. It Soared 880% Over the Past Decade, and It’s Still a Buy Right Now, According to Wall Street. was originally published by The Motley Fool