AI hardware myth cools off? Dell (DELL.US) plunges 11%, Barclays slashes ratings for the three server giants

Zhitong Finance APP noted that Dell (DELL.US) shares plunged 11% on Wednesday, dragging down other data center equipment stocks, as the market increasingly worries that enterprise spending on artificial intelligence (AI) will not be enough to sustain the current AI construction boom.

HPE (HPE.US), Oracle (ORCL.US), and Super Micro (SMCI.US) also declined.

Barclays analysts downgraded their ratings on Dell, HPE, and NetApp (NTAP.US) in a Wednesday report to clients, citing "the pace of enterprise AI adoption as well as substantial price appreciation."

Data center server and other backend equipment manufacturers have been highly favored on Wall Street this year, due to optimistic expectations of continued strong sales tied to AI chip and system demand for years to come. Dell has been one of the top-performing stocks in the market, up over 300% year to date, HPE is up around 160%, and NetApp has doubled.

However, sentiment around the AI infrastructure sector has recently shifted, partly due to concerning revenue data from OpenAI and, more broadly, worries that rising interest rates will create a challenging environment, since much of the current construction boom is debt-fueled.

As a major borrower, Oracle fell 9% on Wednesday and is down 33% year to date; new cloud service provider CoreWeave (CRWV.US) plunged 15%, wiping out its entire 2026 increase.

Barclays analysts said that for Dell, HPE, and NetApp, they have yet to see “a meaningful AI inflection point” in enterprise spending, and downgraded all three ratings from “Buy” to the equivalent of “Hold.” They believe revenue growth should be attributed to the global storage chip shortage, and point out infrastructure companies have passed higher storage chip prices on to customers.

“The market increasingly believes that enterprise adoption of AI will drive a round of hardware upgrades,” Barclays analysts wrote, adding that companies typically allocate only 5% of their IT budgets to AI. “We believe the currently strong enterprise business revenue is more due to storage chip costs rather than a current shift towards AI in enterprises.”

Barclays analysts also found that only about a quarter of total enterprise AI spending goes to hardware. They stated that as storage chip prices normalize and eventually fall, revenue related to infrastructure could be dragged down.

Storage chips are notoriously cyclical, and related stocks took a hit this week after China-based CXMT announced progress on a new chip structure over the weekend. Micron (MU.US) fell 11% this week, SK Hynix dropped 13% in US market trading, and Western Digital (WDC.US) declined over 8%.