Worried about Super Micro Computer? Here’s a solid stock of artificial intelligence (AI) to buy Hand Over Fist instead.

Super Micro Computer (SMCI -2.10%) has been one of the hottest stocks on the market since early 2023, when the artificial intelligence (AI) revolution began to gain momentum, but the company has fallen on hard times of late.

More specifically, Supermicro’s stock has seen a stunning 433% gain since the start of 2023. However, it has retreated 51% since the start of March. This may seem a little surprising at first, given that Supermicro has seen tremendous growth in revenue and earnings thanks to booming demand for its AI servers.

However, Supermicro was accused by Hindenburg Research of accounting manipulation, and the server specialist’s announcement that it would delay its annual filing with the Securities and Exchange Commission (SEC) also contributed to the decline around the stock, which fell significantly in the last time.

So Supermicro’s uncertain outlook makes it a risky investment right now. But there is a solid alternative in the form of Dell Technologies (DELL -1.74%) for investors looking to capitalize on the growing demand for AI servers.

Dell Technologies’ fortunes are changing thanks to artificial intelligence

Dell released its fiscal second quarter 2025 results (for the three months ended August 2) on August 29. The company’s top line rose 9% year-over-year to $25 billion, along with a similar increase in adjusted earnings to $1.89 per share. . The numbers beat consensus estimates of $1.70 a share in earnings on $24.1 billion in revenue.

The server and hardware specialist’s better-than-expected results were driven mainly by a 38% year-over-year rise in revenue from its infrastructure solutions group (ISG) to a record $11.6 billion. Dell’s revenue from server and network equipment sales rose an impressive 80% year over year to a record $7.7 billion.

The company sold $3.1 billion worth of AI servers last quarter. Dell also points out that it’s seeing “an increase in the number of enterprise customers purchasing AI solutions each quarter,” which explains why its AI server orders rose 23% sequentially last quarter to 3.2 billions of dollars. As a result, the company ended the quarter with $3.8 billion in AI server inventory, and management points out that its potential AI server sales “have grown to several multiples of our inventory.”

More importantly, Dell believes it is in a huge multi-billion dollar total addressable market (TAM) for its AI hardware and services. The company estimates that its TAM could grow at an annual rate of 22% through 2027 to $174 billion, up from $79 billion last year. In addition, Dell points out that it controls 26% of the server market, which means it is well-positioned to capitalize on the secular end-market growth opportunity.

This also explains why Dell’s outlook for the current quarter indicates an improvement on its performance over the same period last year. The company expects fiscal third-quarter revenue to rise 10 percent year-over-year at midpoint to $24.5 billion. For comparison, the top line was down 10% year over year in the same quarter last year.

Dell also anticipates fiscal 2025 revenue to rise 10% in the middle to $97 billion. That would be a big change considering its fiscal 2024 top line fell 14%, while non-GAAP earnings fell 6% to $7.13 a share. For comparison, Dell is forecasting 9% growth in its earnings in fiscal 2025 to $7.80 per share.

Additionally, analysts have raised Dell’s revenue expectations this year due to its AI outlook, but there’s a good chance it could grow at a faster pace due to solid backlog and long-term opportunity in the AI ​​server market.

DELL Revenue Estimates for Current Fiscal Year Data by YCharts.

Strong earnings growth could lead to healthy growth in stocks

We’ve already seen that Dell expects its earnings to grow by single digits this year. The bright side is that its core growth is expected to shift into a higher gear from the next fiscal year.

DELL EPS estimates for current fiscal year data by YCharts.

Given the company’s valuation, investors should consider buying Dell right away before improved earnings strength sends the stock soaring. Dell trades at 21 times trailing earnings and 15 times forward earnings. The Nasdaq-100 the index has an average price-to-earnings ratio of 31 and a forward earnings multiple of 29 (using the index as a proxy for technology stocks).

Assuming Dell’s earnings rise to $10.91 a share after a few fiscal years and continue to trade at 21 times earnings at that point, its stock price could hit $229. That would be almost double the current share price. However, it won’t be surprising to see Dell stock deliver stronger gains if the market decides to reward it with a richer valuation due to its AI-fueled growth, which is why investors may want to buy this AI stock before to become expensive. .