If you love the concept undergirding information technology (IT) stalwart Super Micro Computer (NASDAQ:SMCI) – and who doesn’t? – but just don’t want to pay “full retail,” then Super Micro Computer alternative picks may be right for you. These are ideas similar or related to SMCI stock in some tangible way but with arguably better entry points.
Fundamentally, investors gravitate toward the IT specialist because it’s one of the largest producers of high-performance, high-efficiency servers. As a result, Super Micro commands incredible relevance toward data centers, cloud computing and the big one, artificial intelligence. However, some key drawbacks exist.
- Valuation: With SMCI stock trading at nearly 58X trailing-year earnings, it’s richly priced.
- Hot signals: Technical analysis gauges such as the relative strength index are screaming overbought.
- Psychology: At some point, investors may get cold feet due to fears of holding the bag.
Obviously, Super Micro represents a critical cog in the broader digital innovation space. But everything has a price – and SMCI may have exceeded it for many investors. Therefore, these Super Micro Computer alternative picks may offer superior balance.
Dell Technologies (DELL)
Billed as a leading provider of technology solutions, Dell Technologies (NYSE:DELL) covers a broad range of connectivity innovations, including storage, networking, cloud computing and servers. It’s also one of the top Super Micro Computer alternative picks because of the identical focus on arenas like cloud solutions and servers. That said, one of the obvious differences comes down to performance.
Since the start of the year, DELL stock gained a very respectable 15.3%. That’s no comparison to SMCI, which skyrocketed to over a 159% lead. However, what Super Micro lacks is the attractive valuation metrics. For example, DELL trades at a forward earnings multiple of 12.29X. On the flipside, SMCI stares at a forward multiple of 36.56X.
Additionally, circumstances worsen in the top line. Dell enjoys a revenue multiple of 0.69X while Super Micro flies up to 4.57X. Granted, the sales performance for the latter pings much higher than the former. But that’s still a massive premium to revenue. With SMCI having gained so much, investors just might see better value with Dell Technologies.
Hewlett Packard Enterprise (HPE)
Another company billed as a global technology leader, Hewlett Packard Enterprise (NYSE:HPE) focuses on developing intelligent solutions for customers to capture, analyst and act upon data seamlessly from edge to cloud. As well, the tech firm helps create new customer and employee experiences and boosts operational efficiencies for their clients.
As with Dell Technologies, Hewlett Packard represents another direct candidate for Super Micro Computer alternative picks. In particular, the tech firm butts heads with SMCI in the high-performance computing and cloud computing segments. And similar to Dell, HPE simply offers a better value proposition. Currently, shares trade for only 8.15X forward earnings. Again, SMCI tips the scale at almost 37X.
In addition, HPE trades at 0.71X projected free cash flow (FCF). That’s below approximately 80% of the underlying sector. On the other hand, SMCI trades at 16.22X projected FCF. That’s above 97% of sector rivals.
Advanced Micro Devices (AMD)
To be clear upfront, Advanced Micro Devices (NASDAQ:AMD) does not represent a direct example of Super Micro Computer alternative picks. As a semiconductor specialist, Advanced Micro primarily focuses on processors used in various devices, including computers and gaming consoles. It’s also a huge player in the graphics processing unit (GPU) ecosystem, affording it tremendous relevance in AI.
However, AMD doesn’t directly clash with Super Micro because of the former’s lack of complete hardware solutions. Nevertheless, AMD processors are integrated in many Super Micro servers. Indeed, Super Micro frequently distributes press releases regarding its partnership with Advanced Micro.
So, here’s the takeaway. If you anticipate long-term success for SMCI, then it pays to at least consider AMD stock. Sure, both underlying enterprises run hot valuation multiples. Still, AMD represents a slowly marinating opportunity compared to SMCI, gaining just under 25% year-to-date.
Also, analysts rate AMD stock a consensus strong buy. Among 34 individual ratings, only five represent holds and there are no sells in sight. Finally, the average price target of $194.16 implies almost 13% upside, with the $270 high-side target projecting almost 57% growth.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.