This company will be the biggest beneficiary of Super Micro Computers’ problems

Frantic investment in data centers is being driven by our growing need for data storage and processing power and the enormous demands of artificial intelligence (AI) programs. While some data centers are relatively small, others are larger than 100,000 square feet (often millions of square feet). Tech titans like Microsoft, Amazon, AlphabetAnd Meta usually construct this hyperscale data centers.

For example, in 2025, Meta will break ground on an $800 million, 715,000-square-foot campus in South Carolina, and Microsoft will launch a $1 billion project in La Porte, Indiana.

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As seen below, large-scale centers have boomed recently.

This number surpassed 1,000 in 2024 and is expected to increase by 120 to 130 annually. These centers require infrastructure such as servers, storage and racks, so investors should be excited about this opportunity.

Dell Technologies (NYSE: DELL) is a major supplier to the industry, together with Super microcomputer. Supermicro now has some well-documented challenges, and Dell could be a major beneficiary. Here are some things you need to know.

Supermicro’s misfortunes are well documented, so I won’t dwell on them too much. Here’s a quick timeline:

• August: Hindenburg Research issues a scathing short report and Supermicro postpones its annual 10-K filing.

• September: Nasdaq the company announced that this was possible deleted due to its delayed submission.

• October: Supermicro’s accounting firm Ernst & Young resigns.

• November: The company postponed its quarterly 10-Q report filing.

At the time of writing, the stock is trading 84% below its 2024 high.

SMCI data Ygraphs

None of these are just smoking guns; however, these are serious concerns.

It makes sense for a data center operator to avoid the noise and choose Dell for its infrastructure needs over Supermicro, which reported $5.3 billion in revenue in the fourth quarter of 2024 ($15 billion for the fiscal year), 64% of which was attributed to high volume dates. centers. Dell’s Infrastructure Solutions Group earned $11.6 billion in its most recent quarter, so picking up billions of dollars in revenue from a competitor could be a huge boon.

Dell’s recent results are solid, but what analysts estimate for the coming years is the most exciting. Revenue grew 9% to $25 billion in the second quarter of fiscal 2025, while diluted earnings per share (EPS) rose 86% to $1.17. As expected, the Infrastructure Solutions Group, which serves data centers, achieved record revenue of $11.6 billion, with an impressive 38% year-over-year growth.

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Analysts expect earnings per share of $7.87 this fiscal year and even more thereafter:

This is why 20 out of 25 analysts rate the stock as a Buy or Strong Buy, with an average price target of $145 per share, or 10% above the stock price at the time of writing this article. However, analyst estimates may not yet take into account Dell’s potential to take market share from Supermicro. This gives the stock more room to run.

Dell is also attractive because it pays dividends and buys back shares. The company plans to return 80% of its adjusted free cash flow to shareholders and grow its dividend, which currently yields 1.3%, by 10% annually. Adjusted free cash flow was $5.6 billion in fiscal 2024 and $3.7 billion through two quarters of fiscal 2025. Free cash flow should grow significantly along with earnings.

Data center infrastructure needs are exploding and Dell appears to be the company best positioned to benefit from this in the coming years. Technology investors should consider a long-term position in the stock.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Bradley Guichard has positions in Amazon and Dell Technologies. The Motley Fool holds positions in and recommends Alphabet, Amazon, Meta Platforms and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has one disclosure policy.

Prediction: This company will be the biggest beneficiary of Super Micro Computers’ problems was originally published by The Motley Fool