NVIDIA became synonymous with artificial intelligence, but the real opportunity might be somewhere else
NVIDIA has become synonymous with artificial intelligence in recent years, and it’s hard to open any tech or finance website without stumbling across the company’s name. The results are spectacular, the dominance in AI chip market is undeniable, and the stock price reflects that status as the absolute protagonist. But there’s something a lot of people forget when they only look at NVIDIA’s charts: every GPU that comes off the production line needs a server to run on, a network to communicate through, and a data center to exist in.
That’s exactly where HPE, Hewlett Packard Enterprise, comes in — one of the most important and least talked about pieces of the entire AI infrastructure machine that’s growing at breakneck speed. While chipmakers capture the headlines and the highest multiples on the market, the companies building the infrastructure layer are riding the same AI wave at a fraction of the valuation. And HPE is arguably the most underrated name in that group.
While the market still has its eyes locked on chipmakers, HPE has been quietly delivering surprising numbers. With a gain of 15.8% year-to-date through the April 20, 2025 close, when the stock ended the session at $27.81, the company is telling a story that goes well beyond traditional hardware. A multibillion-dollar acquisition that reshaped its revenue profile, rapidly expanding margins, and free cash flow that just turned meaningfully positive round out a picture that few long-term portfolios seem to have noticed yet.
Let’s break down what’s happening with HPE, why the Networking segment has become the engine of the business, how it compares with competitors like Dell Technologies, and what the financial indicators are saying about the real value of this company within the AI ecosystem. 👇
HPE at the center of AI infrastructure
When we talk about artificial intelligence at enterprise scale, it’s nearly impossible not to run into HPE at some point in the chain. High-performance servers, distributed storage systems, high-speed networks, and workload orchestration platforms — all of it passes through Hewlett Packard Enterprise’s hands before reaching the people who actually use AI day to day. The company occupies a strategic space that few competitors can fill with the same technical depth and portfolio breadth. And the most interesting part is that it does this almost under the radar, without the glamour of chipmakers or the big tech names that dominate the headlines.
HPE’s role within the AI ecosystem became even more evident when infrastructure demand started exploding alongside the growth of large language models and enterprise machine learning platforms. Every NVIDIA GPU cluster a company installs in its data center needs robust servers, ultra-low latency and high-bandwidth networks, plus management systems capable of handling the brutal volume of data flowing through those operations. HPE delivers exactly that package, with solutions ranging from physical hardware to intelligent infrastructure management software. This creates a very clear dependency: wherever there’s AI running in production at scale, there’s HPE somewhere in the stack.
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What makes this positioning even more valuable is the long-term relationship HPE builds with its customers. This isn’t a one-time equipment sale — it’s an infrastructure partnership that lasts years and grows alongside each organization’s digital maturity. When a company starts scaling its artificial intelligence projects, it naturally needs more processing capacity, more storage, and most importantly, more networking to support data exchange between system nodes. This continuous expansion cycle is exactly the kind of recurring and growing revenue that analysts love to see on financial statements, and HPE has been delivering it consistently.
Networking: the segment that changed the game
If there’s one segment that catapulted HPE to another level in the AI infrastructure conversation, it’s Networking. The company completed its acquisition of Juniper Networks for $13.4 billion on July 2, 2025, and the results have already started showing up in the financials in a pretty impactful way. Juniper brought with it high-performance routing and switching technology, a substantial installed base across large enterprises and telecom operators, and the AI-driven networking platform called Mist AI, which uses machine learning to automate network operations and anticipate problems before they cause impact.
The financial impact of the acquisition was immediate and impressive. HPE’s Networking segment posted revenue growth of 151.5% year-over-year in the first quarter of fiscal year 2026, reaching $2.706 billion. But the number that really turns heads is Data Center Networking, which grew 382.6% year-over-year, hitting $444 million. The company projected full fiscal year revenue growth for the Networking segment between 68% and 73%. These are hypergrowth numbers, not legacy hardware supplier figures.
What makes these figures even more relevant is the margin profile that the Networking segment carries. Software and managed network services have a very different cost structure than pure hardware, and that shows up directly in profitability. HPE was quick to leverage this, expanding subscription-based offerings for networking, which creates revenue predictability and increases the lifetime value of each customer. This recurring revenue model is exactly what the market wants to see from infrastructure companies looking to be valued at more generous multiples.
There’s also a technical dimension to this story that deserves special attention. Modern artificial intelligence networks are very different from traditional enterprise networks. They need to handle massive GPU-to-GPU traffic, extremely low latencies to make sure model training isn’t sitting around waiting for data, and specific topologies like fat-tree architectures and high-speed interconnect fabrics based on 400G and 800G Ethernet. HPE, with the technology inherited from Juniper and its own fabric solutions for AI data centers, is well positioned to meet exactly this technical demand that will grow exponentially in the years ahead. Every new NVIDIA GPU cluster installed in any data center in the world is, in practice, a business opportunity for HPE’s Networking segment. 🚀
HPE vs. Dell: margins tell a different story
A comparison that really helps understand HPE’s differentiated positioning is looking at Dell Technologies, which is also riding the wave of AI-optimized servers. Dell reported impressive growth of 342% in AI-optimized server revenue in the fourth quarter of fiscal year 2026, reaching $8.95 billion. Those are numbers that make any analyst pay attention. But volume, in this case, came with a significant cost: Dell’s GAAP gross margin was compressed to 20.2%, down from 23.7% in the same period a year earlier. The reason is that a large portion of that growth came from low-margin commodity servers, where price competition is brutal.
HPE, on the other hand, is heading in the opposite direction. Its GAAP gross margin hit 35.9% in the first quarter of fiscal year 2026, an expansion of 670 basis points year-over-year. This is happening because higher-margin networking and software revenue is completely reshaping the company’s profitability profile. HPE’s management projected non-GAAP operating profit growth between 32% and 40% for the full fiscal year. That’s the kind of operating leverage that transforms an infrastructure company into a consistent value generator for shareholders.
This divergent margin trajectory is key to understanding why HPE might be a more interesting opportunity than it appears at first glance. Growing revenue matters, but growing revenue with expanding margins is far more powerful from a value creation standpoint. Dell is moving a lot of volume but leaving margin on the table. HPE is building a revenue mix that favors higher value-added segments, and that tends to show up in the stock’s valuation over time.
What the numbers are saying about valuation
This is where the story gets really interesting for anyone looking at fundamentals. HPE trades at a forward P/E of roughly 11 times, with a market cap in the $37 billion range. Compare that to Dell, which has a market cap of around $135 billion and a forward P/E of 15 times, and to NVIDIA, whose premium multiple already bakes in years of future dominance. HPE’s multiple barely incorporates the growth potential that the AI networking segment is bringing to the company’s results.
The PEG ratio of 0.851 reinforces this thesis. A PEG below 1.0 generally indicates that the market hasn’t yet adjusted the stock price to the pace of earnings growth. In other words, growth is running ahead of the valuation — and that kind of mismatch tends to get corrected once institutional investors start paying attention to the numbers quarter after quarter.
Perhaps the most telling data point of all is the free cash flow trajectory. HPE went from negative free cash flow of $877 million to positive free cash flow of $708 million in a single quarter. And the company projected free cash flow of at least $2.0 billion for the full fiscal year. This cash flow inflection is the kind of signal long-term investors look for, because robust cash flow sustains dividends, share buybacks, and growth investments without relying on additional debt. The market hasn’t fully priced in this turnaround yet, and that represents a window of opportunity. 📊
Why HPE deserves more attention from the tech ecosystem
The artificial intelligence ecosystem has a natural tendency to focus the spotlight on the most visible layers of the technology stack: language models, user interfaces, development platforms, and of course the chips that make everything run. NVIDIA captures a large part of that narrative masterfully, and rightfully so, because GPUs really are the scarcest and most critical component for training and running large-scale models. But what happens underneath that layer — the physical infrastructure that supports the entire operation — rarely gets the same level of analysis and discussion. It’s a blind spot that can cause extremely well-positioned companies to fly under the radar until the numbers simply become impossible to ignore.
HPE is a perfect example of that dynamic. It doesn’t make chips, it doesn’t develop language models, and it doesn’t have a user interface that end consumers will interact with. But without it, or without companies with its profile, none of this works at enterprise scale. The data centers running the world’s most advanced models rely on dependable infrastructure, networks that don’t go down, and servers that can handle absurd workloads without compromising performance. That behind-the-scenes role is strategic and, in many ways, irreplaceable in the short term, because swapping out an entire Networking and server infrastructure isn’t something that happens overnight.
For investors looking for exposure to artificial intelligence growth without paying the premium multiples that come with names like NVIDIA, HPE offers a concrete alternative. The thesis is straightforward: the company is positioned at the center of an AI infrastructure investment cycle that’s still in its early stages. The Juniper Networks acquisition significantly expanded HPE’s reach and technical relevance in the AI data center networking segment. Margins are expanding, cash flow has turned meaningfully positive, and valuation multiples still don’t reflect this new reality.
What to expect going forward
Looking at HPE within the context of AI growth means looking at infrastructure as a long-term strategic asset. Every AI capacity expansion a company undertakes — whether it’s a bank automating credit analysis, a telecom operator using machine learning to manage its network, or a manufacturer deploying computer vision on the production line — represents a concrete opportunity for HPE to deliver servers, switches, routers, and management platforms.
The artificial intelligence infrastructure market is still in the early stages of a very long growth cycle, and HPE, with its expanded portfolio through the Juniper integration, its margins on an upward trajectory, and cash generation that has finally taken off, is positioned to capture a meaningful share of that growth for many years ahead.
HPE’s current financial indicators tell a transformation story that the market seems to be picking up on gradually. A company that’s growing revenue at triple digits in its most strategic segment, expanding margins by hundreds of basis points, generating a free cash flow swing of more than $1.5 billion in a single quarter, and trading at 11 times forward earnings is the kind of asset that tends to attract increasing attention as results solidify. HPE may not have NVIDIA’s shine, but in the AI infrastructure game, it’s playing a quiet and increasingly convincing hand. 💡
