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Until a few months back, analysts and investors were extremely bullish on Super Micro Computer (SMCI), a server maker that's part of the artificial intelligence megatrend. SMCI stock rallied from $4 in July 2022 to a record high of $122.90 in March 2024, the same month it joined the S&P 500 Index ($SPX). Today, the hardware stock trades 75% below all-time highs, burning significant investor wealth in the process.
In recent months, noted short-seller Hindenburg Research has accused Super Micro of accounting manipulation. To make matters worse, SMCI’s auditor, Ernst & Young, resigned from the post, saying it is “unwilling to be associated with the financial statements prepared by management.”
Earlier this week, Super Micro appointed BDO as its auditor, sending the stock higher by 31% in a single trading session. However, given that the company’s management team has delayed filing the annual 10-K report and remains out of compliance with Nasdaq listing standards, it remains a high-risk bet. Moreover, despite a name-drop from Nvidia's (NVDA) CEO Jensen Huang on the company's conference call this week, concerns remain that Super Micro’s clients might divert orders to rival suppliers, potentially driving revenue, earnings, and cash flow lower.
Given these factors, here’s another AI server stock to consider instead of Super Micro Computer.
Is Dell Stock a Good Investment Right Now?
Dell Technologies (DELL) designs, develops, manufactures, and sells information technology solutions, products, and services globally. Its infrastructure solutions group segment provides storage solutions and hyperscale servers. Dell Technologies offers products that help enterprises modernize their infrastructure and accelerate business applications and services. The CSG business provides desktops, workstations, and notebooks to individuals and organizations.
Valued at $97.5 billion by market cap, DELL stock has returned more than 1,000% to shareholders since its re-listing in August 2016. However, it also trades 22% below all-time highs, allowing you to buy a quality stock at a lower multiple.
Investors should note that DELL is expected to report its Q3 earnings after the market closes next Tuesday, Nov. 26.
In fiscal Q2 of 2025 (which ended in July), Dell increased sales by 9% year over year, compared to its 6% growth in Q1. Analysts expect sales to rise by 10% for FY 2025, which indicates the top line will accelerate further in the second half of this fiscal year.
Dell’s server and networking revenue increased by 38% year over year, which offset soft demand in the PC segment. Due to solid enterprise demand, AI server revenue is expected to help Dell grow infrastructure sales by 30% year over year in FY 25.
Dell has forecast its AI hardware and services market at $174 billion. This segment is projected to grow by 22% through 2030, providing Dell with enough room to gain traction, given that it accounts for 25% of this market.
Is Dell Stock Undervalued?
In the last 12 months, Dell has reported revenue of $91.8 billion. Comparatively, its free cash flow stands at $3.36 billion. Analysts expect Dell’s FCF to expand to $5.1 billion in FY25, and surge to $7.5 billion in FY26. If Dell is priced at 18x trailing FCF, the stock would be valued at $135 billion in early 2026, indicating an upside potential of 50% from current levels.
Analysts tracking DELL stock expect adjusted earnings to expand from $7.13 per share in fiscal 2024 to $9.44 per share in 2026. So, priced at 14.4x forward earnings, DELL stock is not expensive.
Out of the 19 analysts covering DELL stock, the consensus is a “strong buy.” The average target price for DELL is $150.79, about 8.5% higher than the current trading price.
