Which AI Stock Is Cheaper: Dell or Super Micro Computer?

Dell (NYSE: DELL) and Super Micro Computer (NASDAQ: SMCI) are leading players in the artificial intelligence (AI) server space. Demand for AI computing has been surging, and each company has been racking up strong growth in the category. But which of these AI server stocks is cheaper?

Valuation showdown: Dell vs. Super Micro Computer

Comparing a company's expected annual earnings per share against its stock price is one way to get a look at a stock's valuation profile, and a smaller earnings ratio can potentially indicate that a company is generating stronger profit relative to its valuation. The following chart provides a comparison of the two companies' valuations by forward price-to-earnings ratios.

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DELL PE Ratio (Forward) data by YCharts

With Dell trading at roughly a 9.6 forward P/E, compared with Supermicro's roughly 13.2 forward P/E, its stock looks significantly cheaper than on a price-to-earnings basis. Of course, this doesn't tell the whole story. Dell has other business units outside the server space and will probably grow its sales and earnings at a slower pace.

Supermicro's earnings are projected to grow at a significantly faster rate, so it makes sense that investors are willing to give it a higher earnings multiple. But Supermicro is still emerging from some recent accounting controversies, so the stock comes with some added uncertainty and risk. Adding another complicating factor to the valuation picture, both companies are being looked at as part of a probe to determine how servers featuring advanced Nvidia processors that are banned from export to China wound up being sold into the country.

Dell is the safer stock here and trades at a low enough earnings multiple to offer significant upside even if its overall earnings growth won't be as flashy. Meanwhile, Supermicro stock looks cheaper in terms of forecasted growth -- but that growth is a riskier bet.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.