Core Viewpoint - Morgan Stanley downgraded the IT hardware sector rating, warning that corporate demand is slowing and component costs are rising, which may lead to significant budget cuts by companies [1][3]. Group 1: Rating Changes - Morgan Stanley downgraded Logitech and NetApp from "Neutral" to "Underweight," resulting in pre-market stock declines of 6.2% and approximately 3.8%, respectively [1][4]. - The rating for Xpeng was also downgraded from "Overweight" to "Neutral," causing a stock drop of 2.1% [2][5]. Group 2: Market Trends and Predictions - Dell Technologies, HP, and HPE also experienced stock declines ranging from 2% to 3% [3][6]. - Analysts indicated that slowing demand, cost inflation, and high valuations are creating a "perfect storm," prompting a more conservative investment strategy for 2026 [3][6]. - The North American IT hardware sector rating was lowered from "In Line with the Market" to "Cautious," with indications that corporate tech leaders are beginning to cut hardware spending plans, which is seen as a "new warning signal" [3][6]. - According to recent survey data, analysts expect a mere 1% year-over-year increase in hardware budgets for 2026, marking the lowest growth rate in nearly 15 years, excluding the pandemic period [3][6]. - The survey also revealed that 30% to 60% of customers are expected to reduce their purchasing budgets for PCs, servers, and storage devices due to price increases driven by rising component costs [3][6]. - Morgan Stanley noted that in the context of high costs and elastic demand, the risk of downward revisions to corporate earnings expectations for 2026 will significantly increase [3][6].