Morgan Stanley Double-Downgrades DELL as Rising Memory Costs Hit Margins

Dell Technologies Inc. (NYSE:DELL) is one of the AI Stocks Making Moves on Wall Street. On November 17, Morgan Stanley cut ratings on major technology hardware makers, including Dell. The firm double-downgraded Dell to “underweight” from “overweight,” and cut its price target to $110 from $144.

“Dell Technologies (UW): AI server mix + component cost inflation to pressure margins and valuation, double downgrading to Underweight (from OW) with a new $110 PT. In May 2023 we upgraded DELL to OW (from EW) and in September 2023 we elevated DELL to our Top IT Hardware Pick, with a belief that the market was under-appreciating DELL’s Gen AI opportunity and path towards accelerating shareholder returns. Since the March 2023 bottom, the stock has re-rated ~7x and outperformed by ~200 points.”

The firm now believes that that Dell is “one of the hardest hit stocks from rising memory costs, stating that margin pressure from AI server mix and rising memory costs are driving a sharp reset in outlook.

Over the past six months, spot prices for NAND flash and dynamic random-access memory products have risen by as much as 50% and 300%. Since Dell has a mix of products, it is going to be most exposed to the higher prices, the firm said.

“DELL is one of the hardest hit stocks from rising memory costs in our OEM universe, and we are reducing our FY27 gross/operating margins by ~150–220bps and EPS by ~12% to reflect AI server strength and headwinds from rising memory costs.”

Dell Technologies Inc. (NYSE:DELL) provides IT solutions, including servers, storage, networking, and personal computing devices, to businesses and consumers worldwide.

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