SMCI vs. HPE: Which Server Stock Offers a Better Value Right Now?

Industry Overview - The global server market is projected to grow at a CAGR of 9.8% from 2024 to 2030, driven by strong adoption across various industries including healthcare, retail, BFSI, and education [1] Super Micro Computer (SMCI) - SMCI's growth is primarily fueled by the increasing demand for AI workloads, with a rise in data centers and the expansion of existing ones [3] - The company's liquid-cooled and modular servers are popular among cloud service providers and enterprises, particularly for handling AI at scale [4] - SMCI is facing near-term challenges such as delayed purchasing decisions from customers evaluating next-generation AI platforms [5] - Margin contraction is occurring due to price competition and a one-time inventory write-down on older-generation GPUs, affecting overall profitability [6] - SMCI revised its revenue guidance for fiscal 2025 from $23.5-$25.0 billion to $21.8-$22.6 billion, with a Zacks Consensus Estimate of $22.07 billion indicating a growth of 47.7% [7] Hewlett Packard Enterprise (HPE) - HPE's server segment sales increased by 29% year-over-year in Q1 2025, driven by strong demand for AI servers [9] - The server segment accounted for 53% of HPE's fiscal 2024 revenues, with a focus on high-margin enterprise-class server markets [10] - HPE's GreenLake platform is gaining traction, with a customer base growth of 5.1% year-over-year, contributing to a revenue run rate of over $1.9 billion [11] - HPE forecasts a year-over-year revenue growth of 7-11% in constant currency, with a Zacks Consensus Estimate for 2025 revenues at $32.6 billion, indicating an 8.2% growth [12] Stock Performance and Valuation - Over the past year, SMCI and HPE stocks have declined by 51.3% and 1.5%, respectively [14] - SMCI is trading at a forward 12-month ratio of 0.92X, while HPE is at 0.70X, making HPE's valuation more attractive [15] Conclusion - HPE is considered a stronger investment option due to its deep server portfolio and GreenLake offerings, while SMCI faces challenges from delayed purchasing decisions and margin pressures [17]