Super Micro Computer SMCI and Hewlett Packard Enterprise HPE are both leading the server space, providing organizations with server-based capabilities, enabling them with high computing power.

Per a report by Grand View Research, the Global Server market is expected to witness a CAGR of 9.8% from 2024 to 2030. Strong adoption of servers across industries like healthcare, retail, BFSI, manufacturing, education and others will drive the server space.

With this strong industry growth forecast, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.

The Case for SMCI Stock

Super Micro Computer’s growth is driven by the need for artificial intelligence (AI) workloads. As a growing number of data centers are proliferating and existing ones are expanding their capacity, the need for SMCI’s high-performance and energy-efficient servers is rising.

SMCI’s liquid-cooled and modular servers are a hit among cloud service providers, government customers and enterprises as these servers possess the capacity to handle AI at scale. Super Micro Computer has further strengthened its AI expertise by collaborating with NVIDIA and integrating its Blackwell GPUs for high compute power.

Despite the massive potential of SMCI’s server offerings, the company is facing some near-term challenges, including delayed purchasing decisions from customers as they are evaluating the adoption of next-generation AI platforms.

SMCI is also facing margin contraction due to the growing price competition and price adjustments as companies are second-guessing their shift from older to newer platforms like Blackwell. In the last reported quarter, SMCI also incurred a one-time inventory write-down on older-generation GPUs and related components, further affecting its margins.

Based on all the above factors, SMCI revised the revenue guidance for fiscal 2025 from $23.5-$25.0 billion to a range of $21.8 billion to $22.6 billion. The Zacks Consensus Estimate for SMCI’s 2025 revenues is pegged at $22.07 billion, indicating growth of 47.7%. The Zacks Consensus Estimate for fiscal 2025 is pegged at $2.08 per share, indicating a year-over-year decline of 5.9%.Zacks Investment Research

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The Case of Hewlett Packard Enterprise Stock

HPE offers a range of server services, including HPE ProLiant, HPE Synergy, HPE BladeSystem, and HPE Moonshot servers. In the first quarter of 2025, Hewlett Packard Enterprise’s server segment sales soared 29% year over year due to strong demand for its AI servers.

Story Continues

HPE’s Server segment generated 53% of fiscal 2024 revenues, and HPE intends to focus more on high-margin businesses like enterprise-class server markets. HPE is also gaining traction on its GreenLake platform that enables organizations to scale their IT infrastructure. Since GreenLake relies heavily on servers, it indirectly highlights the growing traction of HPE’s server business.

HPE GreenLake’s customer base grew nearly 5.1% year over year to 41,000 in the first quarter of 2025. This growth in customer base has contributed to an annualized revenue run rate that has increased 46% year over year, reaching more than $1.9 billion in the fiscal fourth quarter.

Based on all these factors, HPE forecasts to generate year-over-year revenue growth of 7-11% in constant currency. The Zacks Consensus Estimate for HPE’s 2025 revenues is pegged at $32.6 billion, indicating growth of 8.2%. The Zacks Consensus Estimate for fiscal 2025 is pegged at $1.8 per share, indicating a year-over-year decline of 9.6%.Zacks Investment Research

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Stock Price Performance and Valuation of SMCI & HPE

Due to broader market volatility, both stocks have declined in the past year. Shares of SMCI and HPE have lost 51.3% and 1.5%, respectively, in the past year.Zacks Investment Research

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SMCI is trading at a forward 12-month ratio of 0.92X, which is higher than its median of 0.85X, while HPE is trading at a forward sales multiple of 0.70X, much below its median of 0.83X. The lower valuation of HPE stock compared to SMCI makes it more attractive at present.Zacks Investment Research

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Conclusion: SMCI vs. HPE Stock

HPE is comparatively cheaper and has brighter prospects in the server market as it is strongly driven by its deep server portfolio and GreenLake offerings. In the meantime, SMCI is facing near-term challenges stemming from delayed purchasing decisions from customers and margin contraction from pricing pressure.

Furthermore, HPE carries a Zacks Rank #3 (Hold) at present, making the stock a stronger pick compared with SMCI, which has a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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