Furious investments in data centers are driven by our growing need for data storage and processing capacity and the enormous requirements 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 it microsoft, Amazon,Alphabetand Goal They typically build these hyperscale data centers.
For example, in 2025, Meta will break ground on a 715,000-square-foot, $800 million campus in South Carolina, and Microsoft will begin a $1 billion project in La Porte, Indiana.
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As shown below, hyperscale hubs have exploded recently.
Statist.
This number exceeded 1,000 in 2024 and is expected to increase between 120 and 130 per year. These centers require infrastructure such as servers, storage and racking, so investors should be excited about the opportunity.
Dell Technologies(NYSE: DELL) is an important supplier to the industry, along with super microcomputer. Supermicro now has some well-documented challenges and Dell could be a key beneficiary. Here are some things you should know.
Supermicro’s setbacks are well documented, so I won’t dwell on them too much. Here is a brief timeline:
August: Hindenburg Research released a scathing brief report and Supermicro delayed its annual 10-K filing.
September: Nasdaq notified the company that it could be delisted for its late filing.
October: Supermicro’s audit firm, Ernst & Young, resigned.
November: The company delayed its quarterly 10-Q filing.
At the time of writing, the stock is trading 84% below its 2024 high.
SMCI data from YCharts
None of these are irrefutable indications on their own; however, these are serious concerns.
It makes sense for a data center operator to cut through the noise and choose Dell for its infrastructure needs over Supermicro, which reported $5.3 billion in sales in the fourth quarter of fiscal 2024 ($15 billion for the fiscal year). , with 64% attributed to big data. centers. Dell’s Infrastructure Solutions Group earned $11.6 billion in its most recent quarter, so potentially getting billions of dollars in revenue from a competitor would be a huge boon.
Dell’s recent results are solid, but what’s most exciting is what analysts estimate for the next few years. Revenue grew 9% in the second quarter of fiscal 2025 to $25 billion, while diluted earnings per share (EPS) rose 86% to $1.17. As expected, Infrastructure Solutions Group, which services data centers, achieved record sales of $11.6 billion with an impressive 38% year-on-year growth.
Analysts expect $7.87 in EPS this fiscal year and even more:
DELL Annual EPS Estimates; YCharts data.
This is why 20 out of 25 analysts rate the stock as a Buy or Strong Buy with an average target of $145 per share, or 10% above the share price at the time of writing. However, analyst estimates may not yet take into account Dell’s potential to take market share from Supermicro. This gives the action more room to run.
Dell is also attractive because it pays dividends and buys back shares. The company intends to return 80% of adjusted free cash flow to shareholders and increase the dividend, which currently yields 1.3%, by 10% annually. Adjusted free cash flow hit $5.6 billion in fiscal 2024 and $3.7 billion over two quarters in fiscal 2025. Free cash flow should grow significantly along with earnings.
Data center infrastructure needs are increasing and Dell appears to be the company best positioned to benefit 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 spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Alphabet executive Suzanne Frey is a member of The Motley Fool’s board of directors. Bradley Guichard has positions at Amazon and Dell Technologies. The Motley Fool positions and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Prediction: This company will be the biggest beneficiary of supermicrocomputer woes originally published by The Motley Fool
