Despite the extreme stock market volatility at the start of 2025, the artificial intelligence (AI) revolution is moving full steam ahead. Advances in machine learning and automation technology are rapidly reshaping the global economy, ushering in a new era of business productivity and human creativity.
At the core of this transformation are high-performance data centers, which play a critical role in the AI ecosystem. Two leading companies in this space are Super Micro Computer(NASDAQ: SMCI) and Dell Technologies(NYSE: DELL), which supply the essential server equipment and storage hardware to run AI workloads.
Let's discuss whether Supermicro (as it is commonly known) or Dell Technologies is the better AI stock to buy right now.
Image source: Getty Images.
The case for Supermicro
Supermicro presents a remarkable growth story as an early winner in the AI boom. Even with the stock down 66% from its 52-week high at the time of writing, longtime shareholders have still enjoyed a 1,470% return over the past five years.
The company capitalizes on the demand for specialized rack-scale computer systems, which integrate power, storage, cooling, and software components to support graphics processing unit (GPU)-based AI chips from Nvidia and Advanced Micro Devices. Its technical leadership in next-generation direct-liquid cooling (DLC) technology is a key advantage, offering significant energy-efficiency gains for power-intensive data centers. Additionally, the company's U.S. manufacturing presence has become increasingly important amid trade tensions as businesses seek to secure their supply chains.
Supermicro expects revenue to reach $23.5 billion to $25.0 billion in fiscal 2025, a 62% year-over-year increase. Looking ahead, the company sees a path to $40 billion in revenue by next year, driven by growing market adoption of its DLC technology and expanding production capacity. This momentum is accompanied by improving profitability, with Wall Street analysts predicting a 17% increase in adjusted earnings per share (EPS) this year to $2.59.
On the other hand, Supermicro's success has not been without challenges. In 2024, the company faced a headline-making accounting investigation by the U.S. Department of Justice (DOJ) while its auditor resigned due to governance concerns. Favorably, the company has since cleared up some of those issues, releasing an audited 2024 annual report, while an independent special committee cleared it of misconduct allegations. Uncertainties remain, including possible DOJ sanctions, yet the attraction of Supermicro now as an investment is in this comeback story.
Investors who believe Supermicro's growth trajectory is back on track have plenty of reasons to buy shares of this AI leader.
The case for Dell Technologies
Dell Technologies' strength lies in its diversification. Generating $96 billion in revenue in fiscal 2025 (ended Jan. 31), the company is 4 times larger than Supermicro. It benefits from a broad product portfolio across enterprise-grade solutions and a consumer devices franchise.
This year, its AI-optimized server systems powering data centers have driven record earnings. For the last reported fiscal 2025, revenue increased 8% year over year, with adjusted EPS rising 10% to $8.14. Notably, the AI servers and networking segment revenue grew 54% annually, nearly matching Supermicro's momentum.
While sluggish personal computer demand has weighed on Dell's firmwide results, this segment could have a silver lining. Dell's strategic emphasis on AI-powered PCs for businesses and consumers positions it to leverage an anticipated industry-wide replacement cycle for AI-ready devices into the next decade.
Perhaps the strongest case for Dell as the better AI stock over Supermicro is its valuation. Shares trade at a forward price-to-earnings (P/E) ratio of 9.2, a steep discount to Supermicro's earnings multiple of 14.3. One interpretation is that Dell stock is undervalued, with shareholders also receiving a 2.1% dividend yield supported by its high-quality free cash flow.
I'll give Supermicro the edge as the better AI stock based on its more specialized focus on AI infrastructure hardware and leadership in liquid cooling solutions. While the stock is riskier than Dell's, its stronger growth outlook may offer more upside potential if it can overcome regulatory uncertainties. If investors recognize that the delicate macroeconomic environment is a risk to consider, Supermicro stock is a great option for investors to capture tech and AI exposure in a diversified portfolio.
Should you invest $1,000 in Super Micro Computer right now?
Before you buy stock in Super Micro Computer, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Super Micro Computer wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider whenNetflixmade this list on December 17, 2004... if you invested $1,000 at the time of our recommendation,you’d have $495,226!* Or when Nvidiamade this list on April 15, 2005... if you invested $1,000 at the time of our recommendation,you’d have $679,900!*
Now, it’s worth notingStock Advisor’s total average return is796% — a market-crushing outperformance compared to155%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.
Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
