Soaring memory-chip prices are likely to take a bite out of profit margins for computer makers, investment bank Morgan Stanley warned Monday. Dell Technologies (DELL) stock and others fell on the news.
Morgan Stanley analysts downgraded several computer hardware makers amid surging prices for Nand and dynamic random-access memory (DRAM).
“Memory (Nand and DRAM) — a key cost component for servers, storage arrays, PCs, smartphones, etc. — is in the midst of a pricing ‘supercycle’, driven by accelerating demand from hyperscalers, mix shift to high bandwidth memory (HBM), and recent underinvestment in Nand,” Morgan Stanley analysts, led by Erik Woodring, said in a client note.
“Spot prices for these commodities are up 50-300% in just the last 6 months, contract prices for each commodity could be up double-digits (%) every quarter through calendar 2026, and recent reports indicate memory fulfillment rates could fall to as low as 40% over the next two quarters,” the analyst team wrote.
Memory accounts for 10% to 70% of the bill of materials for computer systems, the team said.
Meanwhile, secular drivers such as generative artificial intelligence and data center expansions remain in place, the analysts said.
Dell Stock Gets Double Downgrade
Woodring downgraded Dell stock to underweight, or sell, from overweight, or buy. He also slashed his price target on Dell stock to 110 from 144.
He cut his rating on Hewlett Packard Enterprise (HPE) to equal weight, or neutral, from overweight and lowered his price target to 25 from 28.
Woodring downgraded HP (HPQ) stock to underweight from equal weight and reduced his price target to 24 from 26.
Morgan Stanley also downgraded Taiwan- and Hong Kong-traded computer makers Asustek, Giga-Byte Technology, Lenovo and Pegatron.
On the stock market today, Dell stock tumbled 8.4% to close at 122.48. HPE stock retreated 7% to 21.23. HP stock sank 6.8% to end the regular session at 22.87.
Meanwhile, memory-chip makers Micron Technology (MU) and Sandisk (SNDK) are trading in record-high territory.
Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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