Dell stock plunges 11%, leading data center sell-off as fears mount about 'enterprise AI timing'
Barclays downgraded Dell, HPE, and NetApp on concerns that enterprise AI adoption is lagging.
Key points
- Dell shares fell 11% on Wednesday, leading a sell-off in data center equipment stocks.
- Barclays downgraded Dell, HPE and NetApp, citing enterprise AI timing after a significant run.
- Barclays said strong enterprise revenues reflect memory costs, not enterprise AI adoption.
Dell shares dropped 11% on Wednesday, pulling down other data center equipment stocks as concerns grew that enterprise spending on artificial intelligence will not justify the AI buildout. Hewlett-Packard Enterprise, Oracle and Super Micro also fell.
Barclays analysts downgraded Dell, HPE and NetApp in a report to clients on Wednesday, citing enterprise AI timing after a significant run. The analysts said they have not seen a meaningful AI inflection for the three companies.
What Barclays said
The Barclays analysts attributed increased revenue to the global memory shortage and said infrastructure companies have passed higher memory prices on to customers. They wrote that businesses are allocating just 5% of their IT budgets to AI.
The analysts also found that only about a quarter of total enterprise AI spend goes toward hardware. They said normalizing and eventually declining memory prices could weigh on infrastructure-related revenue.
We believe the strong enterprise revenues are more of a function of memory costs than a move to enterprise AI at this time.
— Barclays analysts
Market reaction and memory news
Sentiment toward AI infrastructure has shifted recently, partly due to concerning revenue figures from OpenAI and fears that rising interest rates will create a difficult environment because much of the buildout relies on debt. Oracle, a heavy borrower, fell 9% on Wednesday and is down 33% for the year, while CoreWeave plunged 15%, erasing its 2026 gains.
Memory stocks were also hit this week after China's ChangXin Memory Technologies reported progress over the weekend on a new chip structure. Micron is down 11% for the week, SK Hynix has tumbled 13% in U.S. trading and Western Digital has dropped more than 8%.
