Yahoo Finance·2025-11-17 07:14Core Viewpoint - Rising memory costs and weakening non-AI hardware demand have led Morgan Stanley to downgrade ratings for major technology hardware manufacturers, indicating increasing margin pressure across the sector [1] Group 1: Memory Cost Impact - Analysts describe the current situation as a "memory supercycle," with NAND and DRAM spot prices increasing between 50% and 300% over the past six months, which is expected to negatively impact earnings until 2026 [2] - Historical trends show that hardware OEMs typically experience gross-margin compression 6-12 months after memory costs rise, with a projected median decline of 60 basis points in global OEM margins by 2026, contrary to Wall Street's expectations of slight margin expansion [2] Group 2: Company-Specific Downgrades - Dell Technologies has been double-downgraded to "underweight" from "overweight" due to its high dependence on memory-intensive products and a shift towards AI servers with lower margins [3] - Morgan Stanley has reduced Dell's price target from $144 to $110 and lowered its fiscal 2027 gross-margin forecast to 18.2%, a decrease of 220 basis points from previous estimates, alongside a 12% reduction in EPS estimates [4] - HP Inc. has also been downgraded to "underweight" from "equal-weight," with its price target cut from $26 to $24, as higher DRAM and NAND prices are expected to pressure its Personal Systems margins [4][5] - The fiscal 2026 gross-margin outlook for HP has been reduced by 90 basis points to 19.7%, leaving it 130 basis points below consensus, with a projected 9% decline in EPS despite an increase in revenue estimates to $56.5 billion [5] Group 3: Hewlett Packard Enterprise Adjustments - Hewlett Packard Enterprise's rating has been lowered to "equal-weight" from "overweight," with a price target reduction from $28 to $25, as integration challenges and rising component costs are anticipated to limit profitability [6] - The fiscal 2026 gross-margin forecast for HPE has been cut by 260 basis points to 32.9%, balancing expected benefits from networking with the negative impact of higher memory prices, and EPS estimates have been lowered to $2.18 from $2.52 [7]