In recent years it has become clear that the technology sector has been an important engine of market growth. Innovations, especially in generative AI, improve software opportunities quickly and offer the potential for greater productivity and adaptability in digital tools.
Although software plays a crucial role, none of this progress could take place without the hardware that drives it. This underlines fascinating investment options in technology companies that offer the serverheardware that is required for performing AI applications.
In this context, Vijay Rakesh, a 5-star analyst at Mizuho, has shifted his focus to the AI room, in particular aimed at serverheardware.
“Generative AI ignites growth and disruption in several markets and pushes the limits of innovation and productivity. AI servers include the infrastructure that makes the AI revolution possible, “Rakesh said. “The AI server market is expected to be a market of ~ $ 406 billion against 2027th, which grows with a CAGR of ~ 54% driven by CSPs (Hyperscale and Tier 2) and the demand for companies. We see Genai growing exponentially, to support secular growth in the AI server market. “
However, not all AI shares are created equal and some present better investment perspectives than others. Rakesh emphasizes two important players in this room, Super Micro Computer (Nasdaq: SMCI) and Dell Technologies (NYSE: Dell), and offers insight in which stands out as a must-buy AI shares. Let us in both dives, using the latest data from Tipranks in addition to insights from the Mizuho report.
Super micro computer
We start with a look at Super Micro Computer, a high-tech company from Silicon Valley that specializes in developing and producing the hardware behind high-performance computing and high-end server stacks. In addition, Super Micro Management software and memory storage systems for a wide range of applications on Enterprise-Scale, including AI, Cloud Computing, Data Centers, Edge Computing and 5G networks.
This company has been working for more than thirty years and has established itself as a GO-TO for high-end computer needs. Super Micro has its own expertise to handle the design and construction of complex server stacks and powerful computers and can install these systems on all scales. The company has product lines available for adapted builds, to meet the quirky needs of customers or ready-made, and can even deal with unique or unusual design requests. Super Micro supports its product range with a large-scale production printing print, able to produce around 5000 AI, HPC and liquid cooling rack solutions every month.
From the perspective of the customer, in particular from those customers in the AI field, the most important point here is the power of the products of Super Micro-de Servers, the high-performance computers, the advanced memory storage to meet the Needs of contemporary advanced technology.
On the financial side, Super Micro $ 5.3 billion in income in the last reported quarter, fiscal 4Q24. This was an impressive 143% compared to the period of the previous year and defeated the forecast by $ 10 million. However, the Q4 EPS of the company, $ 6.25 by non-Gaap measures, missed the estimates at $ 1.56 per share. The company attributed the Miss to a combination of lower gross margins and higher operating costs in the quarter.
We must note here that SMCI shares have fallen sharply compared to their recent peak, in March of this year. Since then it has not been helped by a Damning Short Seller report and a payment of 10 K, the share decreased by 61%, although it still has a profit of around 63%. In the meantime, business management has authorized a stock split, from 10 to 1, to take effect on October 1 of this year.
For Mizuho’s Rakesh, the most important point here is that the AI -hardware segment becomes more pressure and Super Micro is confronted with increasing competition with a resulting loss of market share. He writes about the company: “We recognize SMCI as a consensus AI leader (AI-Server ~ 70% of the Revs), but increasing competition, share loss (SMCI market share in AI servers is a decrease in ~ 80-100% in 2022-23 to 40-50% in 2024E), and continuous competition from Dell and other colleagues are put under pressure from prices and margins. We estimate the current 10-k delays of a share of ~ 10%, and we do not provide a cancellation of shares, because the delays are linked to internal procedural controls, we still see stock loss and margin pressure as an important valuation drivers and justify a 17 % discount on its historical average ~ 12x. “
Rakesh follows those comments with a neutral (hold) rating on the shares, along with a price target of $ 450 that suggests that the shares will remain relatively flat in the coming year. (To view the Rakesh track record, click here)
In general, SMCI receives a hold -consensus from the street, based on 13 reviews, including 2 purchases, 10 possession and 1 sale. That said, shares are priced at $ 463.61 and the average target price of $ 613.92 implies an upward potential of 32.5% in the next 12 months. ((See SMCI -Sharing forecast)
Dell Technologies
The next is Dell Technologies, a well -known name of the global computer world. Dell built his reputation on building PCs and laptops for the direct-to-customer market and continues to hold a strong position in that market, as a maker and supplier of PCs, laptops, monitors and gaming border equipment. The company has carrots in the 1980s; The modern incarnation dates from 2016, when it took over the Enterprise software and memory storage agency EMC in a transaction with a value of around $ 67 billion.
Since then, Dell has expanded his business footprint and now offers customers a series of hardware products to support networks and AI functions. These include high-end server stacks and advanced memory storage, which are much demand from AI developers, data centers and other technical companies that depend on high-performance computing architecture. Dell has taken his expertise in the construction of computer systems shaken by his long experience in the personal computing segment and applied to advanced Enterprise scales applications.
Looking at the AI World specifically, Dell can offer its customers solutions to fit at desktopwork stations, data centers and even cloud -based computing. The computer solutions and hardware of the company can support generative AI applications, including making content, coding, personal digital assistants, design tools -the list is as long as the imagination of AI developers.
The last financial report from Dell dealt with Fiscale 2Q25 and the company defeated the predictions in both the upper and bottom line. The quarterly turnover of Dell rose by more than 9% on an annual basis, to reach $ 25 billion and to beat the prediction with $ 910 million. The income of the company, reported as a non-Gaap profit per share of $ 1.89, was 18 cents per share better than expected.
Prominent among Dell’s Revenue Drivers were the infrastructure solution group, which saw an increase of 38% on an annual basis, to $ 11.6 billion, and the network segment, which rose by 80% to $ 7.7 billion. Both figures were segment records for the company.
When we check in again with Vijay Rakesh, we find the analistic cheerful about Dell, and note that the company has built up a solid AI -hardware company without skiming its existing RETAIL -PC business. Rakesh says about Dell: “We see Dell well positioned in the AI Server Race with a strong NVDA partnership and obtain aggressive share with prices, but still diversified with PC, conventional servers, services and storage solutions. We note that an Enterprise storage renewal and a potential Win11 Win11 Corporate PC renewal cycle is a tail wind, as well as with AI PCs, which can help stimulate both consumers and business upgrades. “
Looks ahead, the analyst outlines sufficient reasons to expect continuous strong performance, write: “We see potentially for $ 9+ EPS for Dell by F26E ($ 10+ EPS in F27/C2026) because it continues to take a market share in AI servers , Maintains a strong position in Compute Server and see PCs return to growth after F24 saw weaker profit per share, mainly as a result of the turnover of ~ 14% J/ J, whereby stronger margins are compensated. “
According to Rakesh, Dell gets an outperform (buy) rating, and he fills that with a target of $ 135 points to a 15% win on the horizon of one year.
The 17 recent analyst reviews of Dell include 14 to buy and keep 3, for a strong buy -consensus classification. The shares are traded for $ 117.31 and their average target price of $ 144.63 suggests a benefit of 23% or more by this time next year. (To see Dell Stock forecast))
It is clear that Dell Technologies is the superior AI -hardware stock that can buy investors.
Disclaimer: The opinions in this article are exclusively those of the recommended analysts. The content is intended to only be used for informative purposes. It is very important to do your own analysis before you make an investment.
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