Memory Shock Hits Big Tech Hardware: Why Morgan Stanley’s Double Downgrade Is Rippling Across the Market

Computer-hardware stocks were rattled on Monday as Morgan Stanley slashed ratings across the sector, triggering broad sell-offs. Dell suffered the steepest blow, receiving a rare double-downgrade from overweight to underweight, sending its shares down 8% by market close. Hewlett Packard Enterprise followed, falling 7% after being downgraded from overweight to equal weight. The wave continued across the industry: HP Inc., Asustek, and Pegatron were all moved to underweight, while Gigabyte and Lenovo were lowered from equal weight to overweight, with each stock dropping up to 6%.

Morgan Stanley analysts argued that hardware makers have entered an unprecedented pricing “supercycle,” driven by hyperscalers racing to expand data-center capacity. That demand has pushed hardware valuations to all-time highs—but also amplified cost risks. The bank warned that soaring prices for DRAM and NAND memory could compress margins sharply, especially as memory fulfillment rates may drop to 40% over the next two quarters.

Memory giants have already begun aggressive price hikes. Reuters reported that Samsung lifted memory-chip prices by as much as 60% since September, a move fueled by tightening supply as AI infrastructure projects absorb global inventory. Analysts drew parallels to the 2016–2018 memory upcycle, when DRAM and NAND spot prices surged 80%–90%. Even then, device makers struggled to pass those costs onto customers, leading to widespread margin compression.

Historical data suggests the companies with the greatest exposure to memory costs are most at risk. Dell, cited specifically by Morgan Stanley, saw its gross margin shrink by 95 to 170 basis points during the last major memory-price spike. The concern may be amplified today: Dell is a major Nvidia partner, assembling AI-optimized systems that rely heavily on high-cost memory components for customers like CoreWeave.

Analysts stressed that rising memory prices could weigh on OEM and ODM earnings through CY26, with memory representing anywhere from 10% to 70% of total bill-of-materials costs depending on the product. Companies unable to pass higher costs to end-customers are expected to lag peers with stable or expanding margins.

With DRAM and NAND prices still climbing and AI build-outs showing no signs of slowing, Morgan Stanley expects pressure on PC and hardware makers’ margins to persist for the next 12–18 months. The downgrade serves as an early warning: in this supercycle, pricing power—not just demand—may determine the sector’s winners and losers.