DELL vs. SMCI: Which AI-Server Stock Offers Better Growth Opportunity?

Core Insights - Dell Technologies (DELL) and Super Micro Computer (SMCI) are prominent players in the rapidly growing AI server market, with Dell being a diversified infrastructure giant and SMCI focusing on high-performance, customizable AI systems [1][2][3] Dell Technologies (DELL) - Dell shipped $5.6 billion of AI servers in Q3 FY26 and has a backlog of $18.4 billion, with expectations of reaching $25 billion in AI shipments for FY26, indicating strong demand [2][6] - Despite strong revenue growth, Dell faces margin pressures due to rising component costs and a product mix skewed towards lower-margin AI systems, which may impact profitability [4][5] - Strategic partnerships with NVIDIA and collaborations with AMD and hyperscale customers enhance Dell's position in the AI infrastructure market [6] - The Zacks Consensus Estimate for DELL's fiscal 2027 earnings is $11.28 per share, reflecting a slight decrease in earnings expectations [7] Super Micro Computer (SMCI) - SMCI reported $12.68 billion in Q2 FY26 revenues, a 123% year-over-year increase, with over 90% of sales coming from AI GPU platforms [9][10] - The company is rapidly scaling its production capacity, targeting up to 6,000 racks per month by the end of FY26, supported by $4.1 billion in cash [11] - SMCI's gross margin fell to 6.3% from 11.8% year-over-year, influenced by a heavy reliance on large hyperscale customers and supply chain challenges [12] - The Zacks Consensus Estimate for SMCI's fiscal 2026 earnings is $2.22 per share, indicating a 7.77% growth from the previous year [13] Market Performance and Valuation - Year-to-date, Dell's shares have decreased by 7.6%, while SMCI's shares have increased by 3.2%, reflecting stronger investor confidence in SMCI's AI-driven growth [14][15] - Dell trades at a forward 12-month price-to-sales (P/S) multiple of 0.61, while SMCI trades at 0.4, suggesting a more attractive entry point for SMCI [18] - Analyst confidence is reflected in the Zacks Rank, with SMCI rated 3 (Hold) and Dell rated 4 (Sell), indicating lower confidence in Dell's near-term performance [22] Conclusion - While Dell offers scale and diversification, it faces margin pressures and cyclical exposure, whereas SMCI's focused AI strategy and rapid revenue growth position it for stronger momentum, making SMCI a potentially better investment choice [21]