Barclays upgraded Dell Technologies (NYSE:DELL) from Underweight to Equal Weight on Tuesday, attributing the change to a significant reduction in AI-related hype that had previously fueled a bearish outlook. As a result, shares gained more than 5% intra-day today. The firm believes much of the AI-driven speculation has now been "washed out of the share price," thereby lowering downside risk. However, Barclays remains cautious about Dell’s core business segments, including enterprise servers, storage, and PCs. The bank raised concerns about the sustainability of Dell's AI revenues and their impact on profit margins. Since Dell's Q1 earnings report on May 30th, the company's stock has dropped approximately 34%, reflecting market apprehensions over these structural challenges. Barclays also pointed out that while Dell’s AI orders and revenues have been strong, the market remains competitive and could lead to potential volatility. Additionally, the bank highlighted a sharp rise in receivables from low-quality customers, which have surged from mid-teens to nearly 50%, raising further concerns. The firm estimates that Dell’s AI servers carry relatively low gross margins, around 12.5% or less, making them less profitable compared to other products. Furthermore, Barclays has yet to observe significant benefits from AI technology spreading into other business areas such as storage or services. Despite these concerns, Barclays acknowledges that Dell's AI business warrants a higher valuation multiple, currently trading at around 11 times the bank's 2025 EPS estimate, compared to peers like HPE and HPQ. However, they remain cautious, noting that the challenges in the broader PC and traditional server markets cannot be entirely offset by the AI business alone. This reassessment led to the upgraded rating, as Barclays recognizes that their earlier Underweight thesis has largely played out.