Dell's AI Server Momentum: Poised to Swipe Super Micro's Market Share

Dell Technologies (DELL) has been making waves in the AI server market, rapidly gaining ground on long-standing leader Super Micro (SMCI). With a strategic focus on non-hyperscale customers and a strong partnership with Nvidia, Dell is well-positioned to challenge Super Micro's dominance. This article explores Dell's AI server momentum and its potential to swipe market share from its rival.

Dell's AI server growth can be attributed to several factors. First, the company has expanded its AI server portfolio, now offering high-end 8xH100 HGX servers that cater to a broader range of AI workloads and customers. This expansion has allowed Dell to tap into the enterprise, sovereign AI, and AI Neocloud markets, where Super Micro previously held a dominant position. Additionally, Dell's ability to innovate and customize its AI servers to meet specific customer needs has been a significant factor in its success.

Dell's partnership with Nvidia has also played a crucial role in its AI server market share growth. Initially, Dell was Nvidia's lowest priority partner, but the company has since become Nvidia's highest priority OEM. This shift is not due to preferential GPU allocations but rather Dell's ability to deliver servers to non-hyperscale customers, including enterprises, sovereign AI plays, and AI Neoclouds. As AI demand surges, Dell's focus on these sectors positions it to challenge Super Micro's dominance.



Dell's AI server momentum is further bolstered by its capital return program through dividends and share buybacks. In February 2024, Dell raised its annual cash dividend by 20% to $1.78 per share, demonstrating its commitment to returning capital to shareholders. Additionally, Dell has a $13 billion authorization for share buybacks, which has helped to boost its stock price. The capital return program has been an "added kicker" for Dell's stock, as noted by Morgan Stanley analyst Erik Woodring, further enhancing its appeal to investors.



While Dell's AI server momentum is impressive, it is essential to consider the author's core investment values. The author emphasizes a focus on sectors that generate stable profits and cash flows, such as utilities, renewable energy, and the REIT sector, over speculative ventures like AI that lack profitability. The author advocates for an income-focused strategy, known as the Income Method, which is particularly suited for retirement portfolios. Investments in funds like the Cohen & Steers Quality Income Realty Fund (RQI) and REITs like AWP and GOOD offer stable yields and potential for capital gains. Additionally, the author values diversification and the adaptability of investment strategies, as seen in their interest in the XAI Octagon Floating Rate & Alternative Income Trust (XFLT) and reliable income-generating investments like Scotiabank.

In conclusion, Dell's AI server momentum is driven by its strategic partnerships, product innovation, and capital return program. As AI demand surges, Dell is well-positioned to challenge Super Micro's dominance in the non-hyperscale market. However, investors should consider the author's core investment values and prioritize sectors that generate stable profits and cash flows. By diversifying their portfolios and focusing on income-generating investments, investors can secure steady returns and mitigate the risks associated with speculative ventures like AI.