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Super Micro Computer SMCI and Hewlett Packard Enterprise HPE are both leading the server space, providing organizations with server-based capabilities, enabling them with high computing power.
Per a report by Grand View Research, the Global Server market is expected to witness a CAGR of 9.8% from 2024 to 2030. Strong adoption of servers across industries like healthcare, retail, BFSI, manufacturing, education and others will drive the server space.
With this strong industry growth forecast, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
The Case for SMCI Stock
Super Micro Computer’s growth is driven by the need for artificial intelligence (AI) workloads. As a growing number of data centers are proliferating and existing ones are expanding their capacity, the need for SMCI’s high-performance and energy-efficient servers is rising.
SMCI’s liquid-cooled and modular servers are a hit among cloud service providers, government customers and enterprises as these servers possess the capacity to handle AI at scale. Super Micro Computer has further strengthened its AI expertise by collaborating with NVIDIA and integrating its Blackwell GPUs for high compute power.
Despite the massive potential of SMCI’s server offerings, the company is facing some near-term challenges, including delayed purchasing decisions from customers as they are evaluating the adoption of next-generation AI platforms.
SMCI is also facing margin contraction due to the growing price competition and price adjustments as companies are second-guessing their shift from older to newer platforms like Blackwell. In the last reported quarter, SMCI also incurred a one-time inventory write-down on older-generation GPUs and related components, further affecting its margins.
Based on all the above factors, SMCI revised the revenue guidance for fiscal 2025 from $23.5-$25.0 billion to a range of $21.8 billion to $22.6 billion. The Zacks Consensus Estimate for SMCI’s 2025 revenues is pegged at $22.07 billion, indicating growth of 47.7%. The Zacks Consensus Estimate for fiscal 2025 is pegged at $2.08 per share, indicating a year-over-year decline of 5.9%.
Image Source: Zacks Investment Research
The Case of Hewlett Packard Enterprise Stock
HPE offers a range of server services, including HPE ProLiant, HPE Synergy, HPE BladeSystem, and HPE Moonshot servers. In the first quarter of 2025, Hewlett Packard Enterprise’s server segment sales soared 29% year over year due to strong demand for its AI servers.