Broadcom vs. Dell Technologies: Which Stock Is AI Powering to Be a Better Buy in 2026?
2026-10-24 17:20
•Brendan Coffey •The Motley Fool
••••• •••••••••• Axe Cap view
Dell vs Broadcom: Which AI Play Fits 2026?
Dell’s lower valuation and AI server scale make it a more compelling buy than Broadcom despite the latter’s higher margins.
Broadcom is a clear winner in AI infrastructure profitability, boasting net margins above 36% and partnerships with giants like Apple and Meta. Yet, these perks come at a steep price—its forward price-to-earnings ratio of 27.7x demands perfection. Dell Technologies, though less glamorous with thinner margins, offers substantial top-line growth around 51% and trades at a much cheaper 17.5x forward P/E. Its huge scale in AI servers, projected at $60 billion by 2027, underpins a strong growth runway. For a South African perspective, Dell’s superior valuation appeals, especially for investors wary of stretched tech multiples. Broadcom’s reliance on suppliers like TSM and concentrated hyperscaler customers carries operational risks that could derail growth if supply chain issues flare. If you believe AI demand will fuel secular growth without disruption, Dell looks like the safer, more reasonably priced bet in this pair. But if Broadcom can sustain its margin and revenue trajectory, its premium might be justified. this is just our opinion and not financial advice
Buy Dell Technologies for exposure to AI infrastructure growth at a reasonable valuation. Avoid Broadcom for now due to valuation risk and supply dependencies.
- USD/ZAR
- DELL
- Supply chain disruptions affecting Broadcom’s chip availability
- Slower-than-expected AI adoption reducing Dell’s projected server sales
6/10
Broadcom and Dell Technologies are both benefiting from AI infrastructure demand, but they represent different investment profiles. Broadcom offers high-margin semiconductor and software solutions with 36% net margins and expected 66% revenue growth, while Dell provides broader hardware infrastructure at lower valuations with 51% projected sales growth. Dell is recommended as the better buy due to its significantly lower Forward P/E (17.5x vs 27.7x) and P/S ratios, despite Broadcom's superior profitability metrics.
Our take is based on reporting first published by The Motley Fool.