3 AI shares to buy instead of Super Micro Computer

Super Micro Computer (SMCI) was a favorite of the AI ​​infrastructure boom, but recent events have cast a shadow over the company’s meteoric rise. On Aug. 28, the company announced a delay in filing its 10-K report for the fiscal year ending June 30, 2024, sending the stock down 19% in a single day.

News of the late filing directly followed a short-seller report from Hindenburg Research that accused SMCI of accounting irregularities, proprietary trading and potential sanctions violations. While JPMorgan analysts defended the AI ​​server stock, Wells Fargo and CFRA are among those who cut their price targets on SMCI in response to this week’s news.

Despite SMCI’s struggles, the AI ​​infrastructure market is booming, with the global AI market projected to reach a growth rate of 36.6% annually from 2024 to 2030. This explosive growth underscores the importance of identifying reliable companies positioned to capitalize on the revolution AI.

For investors who share CFRA’s view of SMCI — bullish on secular trends but wary of the company’s potential reputational risk — here are three stocks with strong growth prospects in the AI ​​infrastructure space.

#1. Dell Technologies Inc (DELL)

Dell Technologies Inc. (DELL) is a well-known name in technology, offering everything from personal computers to advanced cloud and cybersecurity solutions. With a market cap of $78.54 billion, Dell is a heavyweight in the tech world.

This year alone, Dell’s stock is up 51%, and over the past year, it’s up 104.5%.

The stock’s forward price-to-earnings ratio of 14.33 is a significant discount to the technology sector median, making DELL an attractively priced option to invest in AI. In addition, Dell pleases investors with a quarterly dividend of $0.445 per share, which translates to an annual yield of 1.61%.

Dell Technologies has demonstrated robust financial performance, driven primarily by growing demand for AI-optimized servers. In the fiscal second quarter of 2025, Dell reported earnings that beat Wall Street expectations, with adjusted earnings per share (EPS) coming in at $1.89. The company’s revenue rose 9% year over year to $25 billion, beating estimates of $24.2 billion.

Looking ahead, Dell revised its annual revenue estimate upward to between $95.5 billion and $98.5 billion, reflecting confidence in continued demand for AI infrastructure. However, the company acknowledges potential pressures on operating margins due to inflationary input costs and a competitive environment. To mitigate these challenges, Dell uses generative AI internally to improve efficiency and customer experience.

Notable moves include Dell Validated Design for Generative AI with Nvidia (NVDA), which helps customers make faster and better predictions. Dell PowerEdge XE9680 servers, designed for generative AI, are the fastest-growing new product in Dell’s history. They are breaking ground by partnering with Hugging Face for optimized implementation of the AI ​​model locally and collaborating with Meta ( META ) and Microsoft ( MSFT ) to simplify AI adoption.

Analysts are bullish on Dell, rating it a “strong buy,” with an average price target of $154.33 suggesting upside potential of about 33.5%. Out of 16 analysts, 12 recommend a “strong buy”, two say it’s a “moderate buy”, and two suggest a “hold”.

#2. Arista Networks Inc. (ANET)

Arista Networks Inc. (ANET) stands out in the computer networking industry, renowned for software-defined networking (SDN) solutions that address large data center and cloud computing needs. Headquartered in Santa Clara, California, Arista serves a diverse clientele including cloud providers, ISPs, financial services and government agencies, reflecting its broad market reach.

The stock’s performance has been outstanding, up 50% year-to-date and up 90.6% over the past year. Since reaching an all-time high of $376.50 in July, ANET has pulled back, providing a potential entry point.

With a market cap of about $108.6 billion and a relatively high forward P/E ratio of 42.06, Arista is priced for growth and should appeal to investors seeking long-term capital appreciation.

In Q2 2024, Arista reported revenue of $1.69 billion, up 15.9% year-over-year, and non-GAAP EPS of $2.10, beating expectations. Non-GAAP gross margin was 65.4%, which beat management’s estimates, and Arista generated $989 million from operations during the quarter.

For the current quarter, ANET guided for revenue of about $1.72 billion to $1.75 billion, which beat Wall Street’s midpoint forecast. Management is looking for a Q3 gross margin of about 63% to 64% and an operating margin of about 44%, with full-year revenue growth expected to reach 14%.

A recent win for Arista is being selected by Alabama Fiber Network for a $340 million network project, highlighting their expertise in scalable network solutions. It is also working with Nvidia on holistic AI solutions that aim to merge the computing and networking domains into a unified AI entity, and earlier this year introduced Arista Etherlink AI platforms to increase network performance for AI workloads.

Analysts are generally bullish on Arista, with a consensus of “moderate buy” from 23 analysts. Fifteen recommend a “strong buy”, 2 suggest a “moderate buy”, 5 advise a “hold” and 1 recommend a “strong sell”. ANET is trading almost flat with an average price target of $356.65, but the $432 Street-high target implies an expected upside of 22%.

#3. Pure Storage Inc. (PSTG)

Pure Storage Inc. (PSTG) is making a name for itself in the enterprise data storage sector with its all-flash storage systems designed to replace traditional disk arrays. Founded in 2009 and headquartered in Santa Clara, California, Pure Storage is focused on delivering a modern data experience that simplifies IT infrastructure and increases performance.

Despite reporting an 11% year-over-year revenue increase in the second quarter, driven by a 25% increase in subscription services revenue, PSTG stock took a hit last week.

For the second quarter of fiscal 2025, PSTG beat expectations by reporting adjusted EPS of $0.44 on revenue of $763.8 million. However, analysts were rattled by the product revenue miss as well as the company’s downwardly revised guidance for overall contract revenue growth. After the earnings, PSTG was hit by cut price targets from analysts at TD Cowen, Citi and Piper Sandler, with many firms still waiting for signs of a broader positive inflection for data storage.

The stock is now down 28.5% from its mid-June highs, presenting a potential buying opportunity, with PSTG still up 43.8% YTD.

Notably, PSTG now trades at a forward P/E ratio of 30.94 — still on high expectations for future earnings growth, but more reasonable than the 39 times multiple since earlier this summer, when UBS downgraded the stock from evaluation reasons.

At the recent Pure//Accelerate conference, Pure Storage unveiled new platform capabilities to improve AI deployment and cyber resilience. They are on track to become a certified storage solution for NVIDIA DGX SuperPOD by the end of 2024, aligning with leading AI technologies.

Analysts generally have a positive outlook on Pure Storage, with a consensus of “moderate buy” from 21 analysts. The average target price is $69.00, indicating a potential upside of 34.5%. In total, 12 recommend a “strong buy”, 2 suggest a “moderate buy”, 6 advise a “hold” and 1 recommend a “strong sell”.

While the growth story may take some time and patience to unfold, Pure Storage’s strategic initiatives and solid funding position it well for long-term growth in the evolving data storage landscape.

Conclusion

While Super Micro Computer faces serious questions about its accounting lag, Arista Networks, Dell Technologies and Pure Storage offer compelling alternatives for investors looking to take advantage of the AI ​​infrastructure boom. Each company brings unique strengths — Dell with its AI-optimized servers, Arista with its networking prowess, and Pure Storage with its cutting-edge data solutions. With strong financial performance and promising long-term growth, these stocks are solid picks for investors looking for growth opportunities in AI right now.

At the time of publication, Ebube Jones did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, see the Barchart Disclosure Policy here.