Furious investments in data centers are spurred by our growing need for data storage and processing power and the tremendous requirements of artificial intelligence (AI) programs. While some data centers are relatively small, others are larger than 100,000 square feet (often millions of square feet). Tech titans like Microsoft, Amazon, Alphabet, and Meta typically construct these hyperscale data centers.
For instance, in 2025, Meta will break ground on an $800 million, 715,000-square-foot campus in South Carolina, and Microsoft will begin a $1 billion project in La Porte, Indiana.
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As shown below, Hyperscale centers have spiked recently.
This number eclipsed 1,000 in 2024 and is forecast to grow by 120 to 130 annually. These centers require infrastructure like servers, storage, and racking, so investors should be excited about the opportunity.
Dell Technologies (NYSE: DELL) is a major supplier to the industry, along with Super Micro Computer. Supermicro has some well-documented challenges now, and Dell could be a key beneficiary. Here are some things to know.
Supermicro's challenges could be a boon for Dell
Supermicro's setbacks are well documented, so I won't dwell too much on them. Here is a brief timeline:
None of these are smoking guns alone; however, these are serious concerns.
It makes sense for a data center operator to avoid the noise and choose Dell for its infrastructure needs over Supermicro, which reported $5.3 billion in sales in the fiscal 2024 fourth quarter ($15 billion for the fiscal year), with 64% attributed to large data centers. Dell's Infrastructure Solutions Group earned $11.6 billion in its most recent quarter, so potentially picking up billions of dollars in revenue from a competitor would be an enormous boon.
Is Dell stock a buy now?
Dell's recent results are solid, but it's what analysts estimate for the next several years that is most exciting. Revenue grew 9% in the second quarter of fiscal 2025 to $25 billion, while diluted earnings per share (EPS) rose 86% to $1.17. As expected, the Infrastructure Solutions Group, which serves data centers, hit record sales of $11.6 billion on impressive 38% year-over-year growth.