President Trump’s decision to exempt a wide range of tech products has caused a broad-market relief rally, and stocks like Dell (NYSE:DELL) are well-positioned to benefit. Dell Technologies was expected to see an 11% price increase on its products due to tariffs, but the exemption is seen as a game-changer. Goldman Sachs has already lifted its earnings forecast for this company, so should you buy the dip?
Total revenue grew by 8% year-over-year to $95.6 billion in fiscal 2025, and its Infrastructure Solutions Group saw a 29% revenue increase due to demand for AI servers and networking equipment. At the same time, leaving out the massive tariffs on China would be irresponsible as it could still hurt earnings. Dell derives 75% of its revenue from hardwar,e and 40% of its products are manufactured in China.
Even if it re-routes its products from a third country or moves production, there will be a short-term hit to earnings. The current exemption is explicitly temporary and Commerce Secretary Howard Lutnick confirmed that tariffs on these products may return within one to two months under a new "semiconductor tariff" framework. Baseline fentanyl tariffs of 20% on Chinese imports remain in place.
Regardless, I am still bullish here as significant tariffs have been priced in already and the company can weather the storm. Dell has already started passing tariff-related costs onto consumers by reducing or eliminating discounts on its products in the U.S.
On top of that, Dell is heavily investing in AI servers and infrastructure solutions, which are less price-sensitive than consumer PCs. Revenue from AI servers is projected to grow from $9.8 billion in FY2025 to $15 billion in FY2026. The higher margins from AI can offset any tariff losses. These tariffs do not mean game over for Dell since competitors also have to deal with the same tariffs, and some are worse off.
DELL stock is down by 50% from its 2024 peak prices and is a solid buy at current levels. Most data center hardware stocks are trading at a significant discount vs. other AI stocks. You’re only paying 9 times forward earnings here, so it’s hard to see DELL plunging significantly from current levels. The stock also comes with a 2.48% dividend yield, and analysts do not expect EPS or revenue to slow down or decline this year. EPS is expected to climb from $9.27 to $14.56 from FY2026 to FY2030. Revenue growth is expected to be more moderate but still not negative.
The consensus price target of $141.24 implies 67% upside potential. Should you buy DELL stock now? I think yes, you should accumulate since the data center narrative is still solid. But should you go all in? I believe it’s a good idea not to deploy all your cash at once into the market, and especially not into just one stock. If these tariffs are temporary, you’ll see prices get much lower and potentially bottom out around $50 as the market prices in the costs of Dell moving out its manufacturing from China.
