Super Micro Computer ( SMCI ) and Dell ( DELL ) are both benefiting from accelerating demand for artificial intelligence (AI)-enhanced servers, as businesses increase investment in AI infrastructure. As organizations modernize data centers and invest in high-performance computing, these companies capture an increasing share of the structurally growing market.
However, the Super Micro Computer, despite being well positioned to benefit from the rising demand for AI infrastructure, has recently come under pressure. SMCI stock fell sharply following legal action against people allegedly connected to the company in the unauthorized transfer of AI hardware to China. This adds to the company’s regulatory scrutiny, making the stock more volatile in the near term. As a result, investors may need to be cautious when going long in SMCI stock.
In comparison, Dell Technologies seems to be doing well. It has turned the demand for AI into a strong financial force, with high order volumes and a growing backlog that provides revenue visibility. Its ability to consistently convert demand into deliverables demonstrates operational discipline, while its growing AI pipeline signals continued growth.
For fiscal 2026, Dell reported $64.1 billion in AI orders. In addition, it shipped $25.2 billion, and ended the year with a record $43 billion in AI backlog.
Dell is expanding its presence in the PC market while strengthening its Infrastructure Solutions Group (ISG), which includes AI-enabled servers, supported by strong margins on its traditional servers and storage components. At the same time, the company is well-positioned to take advantage of the opportunities of an AI-driven future.
Dell’s ISG business continues to see strong operating momentum, which will drive its overall financial performance and support its share price. The main force driver within this segment is the urgent need for AI infrastructure. In the fourth quarter, Dell recorded $34.1 billion in AI orders, indicating rapid adoption as AI deployments for businesses.
Dell shipped $9.5 billion worth of AI servers during that period and came out with a historic quarter. This growing backlog, coupled with a growing pipeline, indicates strong growth ahead.
Customer diversity is also contributing to ISG’s growth. Dell’s customer base has surpassed 4,000, with an expansion of neocloud providers, traditional business clients, and private organizations. This broad-based adoption demonstrates the strength of Dell’s infrastructure offerings across end markets.
Within ISG, its traditional server business is doing very well. Dell reported strong double-digit demand growth in all regions of the country, with momentum building throughout the period. Unit volume increased alongside a large active buyer base, while product mix improved due to greater adoption of new generation platforms.
Dell’s warehousing business also contributed positively to overall performance, supported by strong demand for its proprietary IP portfolio. Profitability within the segment is improving and is likely to benefit from a higher mix of Dell’s proprietary solutions.
Thanks to strong AI-driven demand and continued strength in its traditional server business, DELL stock has gained 40% year-to-date (YTD). Its strong backlog and compelling valuations suggest some potential upside.
Dell trades at about 14.9 times forward earnings, which is compelling given its strong growth outlook. Analysts are projecting a 28% increase in earnings for fiscal 2027, followed by another year of double-digit expansion in fiscal 2028.
In addition, Dell returns a lot of money through stock buybacks and dividends, which support its investment case. In fiscal 2026, it repurchased $7.5 billion worth of its shares. Dell also increased its annual dividend by 20% through fiscal 2027. The company reiterated its commitment to shareholder returns by authorizing an additional $10 billion in authorized share repurchases.
Analysts currently give DELL stock a consensus rating of “Average Buy”. In contrast, Super Micro Computer holds a “Hold” consensus rating on Wall Street, indicating a more cautious stance from analysts.
As of the date of publication, Sneha Nahata did not have (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
