Will SMCI Be the Next Intel? Should You Buy SMCI in 2026 if You Missed Out on Intel? 

TradingKey - While Dell Technologies (DELL) has gained close to 100% over the past half year, Super Micro Computer (SMCI) has seen a significant downturn even though both companies are benefiting from the same expanding demand for AI-based servers. The difference in their price increases begs a basic question for those evaluating potential investments in the AI infrastructure stack: Is SMCI stock the next Dell, if you have not already bought into DELL, and will you want to purchase SMCI stock in 2026?

The answer to this question will depend on whether or not you believe that SMCI is a rapidly growing operational company with inadequate cash reserves, inadequate internal controls and too heavy a concentration of revenue from a few large customers; or if you believe it is within the process of becoming one of the premier systems integration companies with expanding opportunities for growth up its respective value proposition chains.

The Latest Earnings of SMCI

The results were mixed for SMCI in its Q3 2026 FY earnings report on 05/05/26. Revenue of $10.24 billion fell short of consensus estimates by 17%, as customer sites weren't ready to receive deliveries. That shortfall mattered, but it was not a signal of collapsing demand. Management highlighted the products were built and backlog stayed at a record high; however, they did not reveal a concrete number on that. Profitability, however, went the other way. Gross margin recovered to 10.1% from 6.4% in Q2, and non-GAAP EPS of $0.84 on this was $0.21 higher than expectancies. This margin recapture is a pillar of the bull case, but the guidance dimmed the celebration somewhat: Q4 gross margin was guided to the 8.2% to 8.4% range, edging sequential margin pressure which reminds us that SMCI’s mix and execution can still vary quarter to quarter.

Recovery Outlook: Can SMCI Overtake Tech Competitors Like Dell and Intel? 

Next up, the Dell debate will center around SMCI's escape from its hardware hell. SMCI management is aggressively pursuing the Data Center Building Block Solutions (DCBBS) with an integrated stack of compute, storage, network, and software solutions along with industry-leading cooling technology. Additionally, SMCI's software and service revenue has significantly accelerated as its software revenue in the last quarter exceeded mid-$30MM, a significant increase from less than $10MM only a couple of quarters ago, with year-to-date total bookings exceeding $45MM. This is still tiny compared to the $10 billion-plus in quarterly revenue, but the direction is right since software, services, liquid cooling and turn-key integration generally have higher margins than server manufacturing.

SMCI’s platform-agnostic approach is still quite unique. The business is able to set up and provide AI solutions across Nvidia (NVDA), Advanced Micro Devices (AMD), Intel (INTC) and Arm Holdings (ARM) platforms in short lead times with dense rack-scale solutions, in direct liquid cooling that the management says could reduce data center power use significantly. Should DCBBS and related offerings meet the contribution targets management has been tossing about in the coming two years, sustaining gross margin at or north of 10% and raising operating margin more will be more realistic. But shareholders need more confirmation, in the form of steady quarterly margins, more transparency around the economics of DCBBS, and real positive free cash flow. Until then the transition is aspirational, not operational.

What Are the Risks of SMCI?

The largest short-term risk is cash. Operating cash flow plunged to roughly $6.6 billion negative, with free cash flow near $6.7 billion as a result of a build-up of inventory to roughly $11.1 billion and receivables that remained high. There has been a major rise in the level of net debt from over $1 billion last quarter to approximately $7.5 billion this quarter. With both lower inventory turns and slower collections, the cash conversion cycle has increased from 54 days to 106 days from the previous quarter, as expected when a capital-intensive model accelerates in front of pre-commitment site preparation activity, along with elongated credit terms through the supply chain. When everything works smoothly, all parts of the supply chain function optimally as well. Supply chains become pinched anytime that an element breaks down during the supply chain process.

Customer and product concentrations provide fragility. Over 80% of revenue is from AI GPU systems, and revenue remains concentrated among a small number of hyperscale and cloud customers. A pair of customers accounts for more than 10% of sales apiece, and one major data center customer nears 30%. That just makes SMCI vulnerable to timing of deployments, dynamics of GPU allocations, and shifts in spending priorities by a few giants.

Governance is another dividing line. The U.S. Department of Justice has charged one of the co-founders of SMCI with illegal exports of high-end AI servers to China via third parties, a case which also names an SMCI co-founder. SMCI states it is not a defendant or target and maintains a zero-tolerance policy for violations. Nonetheless, the event—combined with its auditor resigning in 2024, a fine from the SEC in 2020—raises even more questions from investors about its internal controls and compliance. A governance discount is a real figure, something that is embedded in the multiple and in the company’s cost of capital.

Is SMCI Stock Already Priced for Disaster? 

When comparing SMCI with similar types of stocks, it seems to be priced very low considering its expected future growth rate. SMCI's forward PE is approximately 13.7 while its EV/S (enterprise value to sales) is approximately 0.7; additionally, the market continues to forecast revenues growing from roughly $40 billion in FY2026 to more than $60 billion in FY2028 for SMCI.

If an analyst looked at the stock using a purely analytical view, there are even screens indicating a forward PEG for SMCI is less than 0.5; very few other AI infrastructure companies that have similar growth profiles are trading at such low valuations.

The issue with SMCI is that the market does not seem to overlook growth; the market appears to be discounting liquidity risk, concentration risk and corporate governance issues associated with SMCI. By stabilizing cash flows, shortening cash conversion cycles, demonstrating more about DCBBS profitability and addressing the compliance overhang issue, it is possible for SMCI to be re-rated over the next 12 to 24 months. Otherwise, continued multiple contraction (possible dilution) and tightening supplier terms are all very real possibilities.

Conclusion: Is SMCI the Right High-Volatility Bet for 2026? 

Dell and SMCI both serve as comparisons in this instance. Dell has very good scale amongst all three business lines which allows them to generate steady cash each quarter and have good governance which helped Dell's valuation to lift as AI server sales grew exponentially. Dell has historically shown that it has had a much higher operating margin than SMCI, but given SMCI's historical growth rate twice that of Dell, they could catch up fairly quickly should the adoption of AI continue at this or an increasing rate.

For any distribution of stocks, there will be certain points in time where you want to take the risk of owning the stock; therefore, if you are willing to take some risk and are most likely going to be in the stock for a long enough time frame (3 or more years), then establish a small, partial position in SMCI until you get confirmation things are on the right track, which may be any or all of the following: gross margin being greater than 10% for several quarters; operating cash flow turning positive as inventory normalizes and cash conversion cycle decreasing significantly; DCBBS, software, and services clearly show that they are generating a continuing stream of revenues; there are fewer customers making up a large percentage of revenue; and, the governance risk will stop without inflicting substantial shrinkage to the business. Until then, the company should be available to purchase at a low price for some time to come.

Investors seeking less volatility in an investment should consider investing in Dell, the cleaner representation of demand for AI server capacity versus cash management. The potential upside of SMCI is still big, assuming SMCI improves its execution; however, there are significant risks associated with the execution of SMCI's strategy and its balance sheet.

There are the required elements present for SMCI to transition into a more sustainable, higher-margin integrator: a faster time-to-market, platform flexibility and a growing services stack. Nonetheless, the results in the Q3 period prove to investors why SMCI trades at a lower multiple (the multiple of the amount investors are willing to pay for an investment based on its revenue) to competitors: cash burn, inventory build and unanswered governance questions. If these concerns are resolved, investors should view SMCI's current stock price as overly pessimistic with the possibility to see improvements in its multiple as the future unfolds. In the interim, SMCI is best suited for risk-tolerant investors that are willing to tolerate higher levels of volatility in exchange for the opportunity for a multi-year return. SMCI's successful execution will be the most important factor for the success of its stock.