Super Micro Computer (SMCI +11.59%) stock soared 10% through 1:25 p.m. ET today on some very positive news from a competitor.
Shares of Super Micro archrival Dell Technologies (DELL +32.80%) catapulted nearly 29% higher this afternoon in response to a powerful earnings beat Dell delivered last night. Dell delivered non-GAAP Q1 profits of $4.86 per share (and GAAP profits of $5.24 per share), both numbers well ahead of analysts' forecast $2.88 per share. Dell also beat soundly on sales, reporting $43.8 billion versus analysts' $34.8 billion consensus estimate.
Image source: Getty Images.
But wait. Super Micro and Dell are competitors. Doesn't this mean that if Dell is doing well, Super Micro isn't?
Not necessarily, if what we're seeing here is a rising tide (of demand for artificial intelligence servers) lifting all (or at least both) boats. Assuming there's sufficient demand for servers to outfit AI data centers, then Dell's good news could actually foreshadow more good news for Super Micro as well.
And there certainly does seem to be a lot of demand. Dell saw sales surge 88% year over year in Q1, and Dell's profits soared 282%. This speaks strongly to pricing power among server suppliers, and not to Dell and Super Micro fighting some kind of price war over market share.
Indeed, Dell reassured anyone doubting the durability of the artificial intelligence revolution. "AI orders" made up 56% of Dell's business last quarter, and "AI servers" in particular were nearly two-thirds of total AI orders. Apparently, the AI revolution is alive and well, with Dell COO Jeff Clarke commenting, "the AI opportunity shows no signs of slowing."
That sounds like good news for Dell… and probably for Super Micro stock as well.
Rich Smith 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.
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Great news for Dell could be pretty good news for Super Micro stock, too.
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