Melius Research says the next leg of the artificial intelligence trade is widening beyond chipmakers, with legacy tech firms gaining new momentum as enterprises roll out AI infrastructure.
In a new CNBC interview, Ben Reitzes, the firm’s head of technology research, said his team is focused on what he called the “elite three” semiconductor leaders while also flagging opportunities in traditional hardware and enterprise platforms adapting to the AI era.
“And we see a lot of opportunities to win here. In semis, we’re kind of recommending the elite three now, which are Nvidia, Broadcom, and AMD. We think the TAM (total addressable market) for compute and networking is $2 trillion by the end of this decade, and maybe even higher now.”
Reitzes adds that Dell is positioned to benefit as enterprises move to deploy AI systems within existing data centers.
“We also think that Dell is going to have a role as enterprises roll out AI. We just pumped our target there to 200 bucks. And that stock’s doing great and getting new life.”
He also highlighted IBM’s progress, saying both companies are reasserting relevance in the age of generative AI.
“We’re in the early innings for some of the legacy tech. You’ve seen the run in the HDD stocks recently, but IBM, Dell are getting a new lease on life. IBM’s doing a great job, probably in quantum. We see that later this decade, but they’re also reinventing themselves around infrastructure software, which is not SaaS (software as a service), and it’s priced by the instance.”
Reitzes notes that Dell remains undervalued despite its AI exposure and shareholder-friendly policies.
“Dell’s a cheap stock, and Michael [Dell’s] been on this. He’s got a cheap stock, he’s buying back stock. I mean, we only went to a 15 multiple. I mean, these guys used to get a 30 multiple back in the day. There’s a shot that a lot of these hardware companies get over, you know, a market multiple or better.”
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