This Might Be the Most Underrated Artificial Intelligence Stock to Own in 2025

Are you on the lookout for an underrated artificial intelligence (AI) stock to invest in for 2025? While many investors may find it tempting to put their money into the chipmaking giant Nvidia—with its impressive market capitalization of $3.3 trillion—the potential returns from this stock may be limited moving forward. While Nvidia is a solid option, other stocks might present better opportunities for investors.

One underappreciated AI stock that holds potential for strong growth in 2025 is Dell Technologies (DELL 0.16%). Here's why Dell may offer significant upside not just this year, but over the long term.

A big upgrade cycle may be overdue

In recent years, many consumers have delayed upgrading their phones and computers due to challenging economic conditions and rising inflation. However, there are several factors that could change this trend, especially regarding personal computers (PCs).

The introduction of many AI-enabled PCs could provide consumers with the incentive to finally upgrade their technology to take advantage of these next-generation capabilities. Additionally, it is estimated that around 60% of Windows PCs still run on Microsoft's Windows 10 operating system. Since support for this OS is ending on October 14, users will no longer receive security updates, which can lead to vulnerabilities.

This poses a problem because while AI tools can help everyday users, they can also aid hackers. The need for consumers and businesses to keep their computers secure may drive the demand for upgrades. While it's feasible to simply upgrade an existing operating system, investing in a new machine would allow users to benefit from enhanced operating systems and AI capabilities. Therefore, a significant upgrade cycle could be on the horizon.

Strong PC sales could make 2025 a fantastic year for Dell

One segment where Dell has been facing challenges is its client solutions group, which includes the sales of PCs. The latest earnings report from the company indicated sales of $24.4 billion, reflecting a 10% increase for the quarter ending November 1, 2024, despite a slight 1% decline in revenue from the client solutions group, totaling $12.1 billion. Specifically, consumer sales in this sector decreased by 18%.

Nonetheless, Dell's strong performance in its infrastructure sales is noteworthy, as revenue from servers and networking surged by 58% during the same period, accounting for $7.4 billion. Should PC sales increase, it would bolster Dell's overall revenue and potentially lead to greater investor confidence and returns.

Dell looks like a slam-dunk buy right now

Despite a notable 51% rise in Dell's share price throughout 2024, the stock still appears remarkably undervalued, trading at a forward price-to-earnings multiple of 12 based on analyst expectations. Furthermore, its price/earnings-to-growth multiple of 0.6 suggests that this stock remains a bargain considering the growth prospects for the company over the next five years.

With its strong performance in server and networking sales, combined with a potential PC refresh cycle looming, it’s clear why Dell has the potential to be a top-performing AI stock in 2025 and beyond. Now is an opportune time for investors to consider this stock while its valuation remains low.

AI, Stocks, Investing