Betting On AI Servers? Dell’s Order Book Deserves A Look

Both hardware giants are riding the AI boom, but one has a dramatically larger backlog and a surprisingly cheaper valuation, making it the cleaner bet on the industry's future.

If you own Hewlett Packard Enterprise (HPE) or Dell Technologies (DELL), you likely hold it for the same reason: to get a piece of the historic build-out of computing infrastructure, a demand-wave now supercharged by Artificial Intelligence. The two are old-guard rivals, and anyone holding one is making an implicit choice over the other. Both stocks have soared.

But decisions are about the future. And looking forward, a stark divergence appears. While both companies are executing well, the evidence suggests Dell currently offers a more direct and powerfully confirmed way to own this industry's momentum. The surprise is that despite its stronger growth and massive order book, Dell is also the cheaper of the two stocks.

The Forward Signal: A Tale of Two Backlogs

The cleanest signal of a company's future is its own forecast, and here, both companies sent a bullish message. At their latest reports, both HPE and Dell raised their guidance, a strong sign for the entire sector. HPE now expects full-year revenue growth of 31%, while Dell lifted its full-year revenue forecast by a staggering $27 billion at the midpoint.

But the story behind that guidance is where the two paths diverge. The most concrete measure of future business is the order book, and Dell's is in another league. HPE reported a "record company backlog," booking $1.8 billion in new AI systems orders to bring its cumulative total to $16.4 billion. It entered the third quarter with an AI systems backlog of $5.9 billion.

Compare that to Dell. In its first quarter alone, it booked $24.4 billion in AI orders. It ended the quarter with a record AI backlog of $51.3 billion. That is not a small gap. Dell's backlog for AI systems is nearly nine times the size of HPE's, suggesting it has captured a vastly larger share of the committed future spending in the industry's hottest segment.

The Valuation Gap

Here is the twist: the company with the much larger forward-looking order book is also the one with the more attractive valuation. HPE trades at a price-to-operating-income multiple of 31.1, while Dell trades at 25.8. Dell is the cheaper of the two.

The trailing results confirm this story. Over the last twelve months, Dell grew revenue at 39% to HPE's 23%. It is also more profitable, with an operating margin of 8.1% versus 5.8% for HPE, and it carries less debt. In this case, the past performance doesn't contradict the future outlook; it reinforces it. The company with the stronger forward demand signal is also the one that has been executing more profitably on a larger scale.

Where HPE's Bet Could Still Pay Off

This does not mean the case for HPE is closed. An investment in HPE is a bet on a different, potentially more durable, long-term strategy. The company is focused on integrating its recent acquisition of Juniper Networks to create what it calls an "end-to-end technology partner." The goal is to leverage its HPE GreenLake private cloud platform to build a stickier enterprise ecosystem. The company notes that the net retention rate for its GreenLake services remains near 110%, a sign that once customers are in, they stay and spend more.

The Big Risk: Is This All A Pull-Forward?

The primary risk for an investor in either stock is the same. On both earnings calls, analysts pressed management on whether this incredible demand is sustainable or simply a "pull forward" of future orders as customers panic to secure scarce components. Dell's management acknowledged the dynamic, stating, "Customers want to ensure they have access to supply."

Both companies are selling everything they can make. HPE's CEO noted that any potential upside "really comes down to availability of supply." Dell's management was even more blunt: "We have a supply issue. We are supply constrained in the second half. It is not a demand issue for us." An investor today is buying into a boom where demand is far outstripping supply, and it is an open question how much of that demand is borrowed from future years.

The Bottom Line

For an investor wanting exposure to the AI infrastructure build-out, the choice between these two giants turns on the scale and quality of their forward demand. Dell offers direct, massive exposure through a confirmed AI backlog that dwarfs its rival's. With HPE, you are underwriting a longer-term integration story, betting that its combined portfolio will create a more defensible enterprise franchise over time.

The tradeoff is clear. With Dell, you get the clear leader with stronger metrics at a more reasonable price, but you accept the risk of buying into a frantic, supply-constrained cycle. With HPE, you get a potentially stickier long-term vision, but you are betting on a company that is, for now, a distant second in the race to capture the AI boom. The right move isn't to trade tickers, but to ask which of those forward bets you are more comfortable making.

Want To Stack Them Up Side By Side Yourself?

You can line Hewlett Packard Enterprise and Dell up directly on the HPE peer comparison, weigh them on valuation, growth, margins, and returns, and swap in any other Technology Hardware, Storage & Peripherals names you hold.

Asking that question of one pair is easy. Asking it of every stock you own, and re-asking it each quarter as the numbers move, is the part almost nobody keeps up with, and it is exactly where most portfolios quietly fall behind the market.

The 30 Stocks That Already Pass This Test

Now imagine skipping the work entirely and simply holding the names that already clear this bar: the strongest forward setups at the most reasonable prices, screened, picked, and sized for you.

That is the Trefis methodology. The Trefis High Quality (HQ) Portfolio scores quality across thousands of names, holds the 30 strongest, and re-balances on rules, not gut feel. It has outpaced a benchmark that combines the three major indices - the S&P 500, S&P Mid-cap, and Russell 2000.