Investing.com -- UBS's analysts believe that Dell Technologies’ shares now reflect the company’s roughly 170% surge over the past year, which has far outpaced the broader market as investors flocked to AI infrastructure plays.

Analysts downgraded Dell Technologies from “Buy” to “Neutral”. Despite the downgrade, UBS raised its 12-month price target for Dell shares to $243 from $167, citing continued AI momentum and improved competitive positioning. However, the new target remains below Dell’s May 8 closing price of approximately $260.

UBS acknowledged Dell’s strong execution in AI-optimized servers and praised its supply-chain strategy, particularly its ability to manage rising component costs such as memory.

During its first quarter 2026 earnings report, Dell projected that revenue from its core AI-optimized server business will double in fiscal 2027. The company also pledged increased cash returns to shareholders.

According to a March filing, Dell’s total workforce shrank by roughly 10%, or 11,000 employees, in fiscal 2026—a move that suggests the AI server maker is curbing external hiring to control expenses.

The bank expects Dell’s earnings to grow more than 25% in fiscal 2027, fueled by AI server revenue projected to rise over 100% after already climbing 152% in fiscal 2026. Dell previously guided AI-related revenue to approximately $50 billion in FY27.

However, UBS cautioned that investor expectations may already exceed those forecasts. The report noted that markets could be pricing in earnings-per-share growth closer to 30–35%, well above Dell’s long-term growth outlook. Dell stock is currently trading at around 20 times expected CY26 earnings and 18 times CY27 estimates, compared with about 10 times forward earnings earlier this year.

UBS analysts also said recent disruptions involving rival AI server providers may create additional opportunities for Dell. The report referenced allegations involving illegal exports of Nvidia GPU-based servers by individuals tied to a competitor, which could push enterprise, sovereign, and “neocloud” customers toward Dell.

UBS forecasts Dell revenue to rise from $113.5 billion in FY26 to $140.1 billion in FY27, while diluted EPS is expected to increase from $10.29 to $12.85 over the same period.