Dell Technologies (NYSE:DELL) has cemented its status as a leading force in the technology sector with its IT hardware, software, and services. However, the past year has proven to be a rollercoaster ride for Dell’s stock price.

After hitting a low of $52.05 in early August 2023, DELL surged to a high of $179.70 by May 29, 2024. However, disappointing first-quarter earnings triggered a substantial decline in the stock price. Presently, it is trading around $108. Despite this drop, DELL stock boasts a whopping 40% return since January. Notably, the Nasdaq 100 advanced 13% year-to-date (YTD).

Despite short-term challenges, Dell still remains an intriguing prospect for long-term investors. However, from a technical standpoint, a potential near-term correction toward its 50-day moving average (MA) might offer a more enticing entry point for investors. Given the current market conditions and Dell’s recent performance, it is crucial to evaluate whether now is the opportune time to invest. Therefore, based on the current landscape, we suggest holding off buying Dell stock for the time being.

Navigating Challenges and Addressing Profitability Concerns

Dell Technologies operates through two key segments: the Infrastructure Solutions Group (ISG) and the Client Solutions Group (CSG). ISG, which includes servers, storage, and cloud services, remains central to Dell’s business and benefits from digital transformation trends. In contrast, CSG, which covers PCs and client devices, struggles with reduced consumer demand and increased competition.

For the first quarter of fiscal 2025, Dell reported $22.2 billion in revenue, marking a 6% year-over-year (YOY) increase. However, operating income fell 14% YOY to $920 million, and adjusted diluted EPS decreased by 3% to $1.27. Despite a strong performance in artificial intelligence (AI)-optimized servers, with the backlog growing over 30% to $3.8 billion, concerns about profitability and a lack of forward guidance have impacted investor confidence.

Looking ahead, through strategic partnerships with Ericsson (NASDAQ:ERIC) and Broadcom (NASDAQ:AVGO) Dell aims to enhance its position in telecom infrastructure and hyper-converged solutions. Moreover, the company’s commitment to shareholder returns through buybacks and dividends should be noted.

Despite these efforts, recent financial results suggest a cautious outlook during the current volatility on Wall Street. Although DELL stock is potentially a robust investment for long-term investors, at this point, they should wait for a more favorable entry point.

How AI May Impact Dell Stock

The AI market is expected to grow, from $214.6 billion in 2024 to $1,339.1 billion by 2030. This reflects a strong compound annual growth rate (CAGR) of over 35%. Dell’s focus on AI and innovation, including its involvement in Nvidia‘s (NASDAQ:NVDA) upcoming Blackwell chip and Elon Musk’s new xAI data center in Austin, positions it well for future growth. However, investors expect the company to address concerns over income and profitability levels.

If you are an investor who looks at charts for technical analysis, you may note the short-term bearish momentum in Dell stock. Its price has diverged significantly from the 50-day moving average (MA) of about $137. The next test for Dell shares would likely be the 200-day MA of about $104. Given the current bearish sentiment around tech stocks, we expect Dell stock to decline toward $100, or even below.

Finally, the stock’s price-to-earnings (P/E) ratio of 21.8x and price-to-sales (P/S) ratio of 0.9x are slightly higher than peers. In other words, investors will scrutinize the next earnings by Dell’s management to see if the current valuation levels can be justified.

Considering these factors, we believe the short-term instability on Wall Street warrants caution. Investors should monitor Dell’s financial performance and market conditions while considering the potential for future growth driven by AI and cloud computing.

Prudent Now: Consider Buying on Dips

Dell Technologies remains a formidable force in the tech industry with promising long-term prospects. The company’s strategic investments in AI and cloud computing provide a solid foundation for future growth. The potential inclusion of Dell in the S&P 500 index could further enhance its appeal.

However, the current investment climate and the stock’s recent performance suggest that holding Dell stock is the most prudent course of action. Looking at a technical chart, we expect an initial decline towards the $100 level. This could be followed by a period of consolidation within a $90-$110 trading range, to set up a rally to go towards $150. For current investors, maintaining positions while staying informed about Dell’s progress and market developments is advisable.

Dell could offer more attractive opportunities once a clearer margin of safety is established. Finally, analysts’ long-term sentiment remains positive, with a 12-month median price forecast of $160.26, indicating 48% potential upside.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.