The bull market on Wall Street persists, aided by stocks like Nvidia and Microsoft, which are posting tremendous results on the back of the artificial intelligence (AI) boom. Knowing when to invest with the market near all-time highs is difficult. Many people feel the bull market will continue with a perceived business-friendly incoming administration and Big Tech investments in AI. These companies are forecast to pour $250 billion into capital expenditures next year alone. And, as shown below, revenue from AI could exceed $820 billion by 2030.
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This doesn’t mean stocks will continue rising; there are always risks. I’ll discuss buying strategies in a bull market below. But first, here are two very different companies that could each provide excellent long-term returns.
The number of hyperscale data centers (those over 100,000 square feet) eclipsed 1,000 this year, and the forecast is for at least 120 to come online annually for the foreseeable future. These massive centers, some over 1 million square feet, need infrastructure like servers. Dell (NYSE: DELL) is a market leader in this area. Dell’s Infrastructure Solutions Group recorded record revenue last quarter, $11.6 billion, with 38% growth. The company’s total sales increased 9% to $25 billion for the quarter.
Dell believes its addressable market in AI will be $124 billion and its total infrastructure market $265 billion by 2027. Recent developments at its competitor Super Micro Computer likely mean Dell will capture even more of this market than previously expected. Supermicro is reeling from a short report, delayed financial filings, and the resignation of its auditors. Its public struggles should benefit its competition. As evidence, analysts have been busy raising their Dell price targets this month.
Wells Fargo raised its target from $140 to $160 per share, while Morgan Stanley raised its target from $136 to $154. The targets are 7% to 11% above the current price; however, if Dell continues to dominate the server market, analysts will likely raise them again. Shareholders also benefit from a dividend and share buyback program that returned a combined $1 billion last quarter. Dell expects to increase its dividend by 10% annually through at least fiscal 2028. The AI opportunity, competitor struggles, and rising price targets make Dell a tempting stock to own for the next several years.
