US IT hardware stocks are plummeting as Morgan Stanley signals declining demand

U.S. IT hardware stocks fell on Tuesday after Morgan Stanley downgraded the sector, warning of slowing demand as companies rein in spending amid economic uncertainty and rising component costs.The Wall Street brokerage said enterprise technology leaders scaling back their hardware spending plans are exacerbating existing concerns about higher input costs and supply bottlenecks, shifting the industry’s view from “cautious” to “in line.”

“A ‘perfect storm’ of slowing demand, input cost inflation and rich valuations is brewing that will make us more defensive in 2026,” the analysts wrote.Shares of Hewlett Packard Enterprise and Dell Technologies fell as much as 5%, while HP Inc. fell by 2.5%.

U.S.-listed shares of Logitech and NetApp fell about 4% and 5.5%, respectively, after the Wall Street brokerage cut both from “equal weight” to “underweight.”

The sector-wide selling sent the stock market’s IT hardware index down 1.1%, amid broader market weakness.

Morgan Stanley’s latest research pointed to annual hardware budget growth of just 1% through 2026, the weakest non-COVID reading in about 15 years. A separate survey by the value-added reseller brokerage indicated that 30% to 60% of customers could scale back planned purchases of PCs, servers and storage if price increases linked to component inflation continue.

While AI-powered demand has been a tailwind for hardware makers, uncertainty over President Donald Trump’s tariffs has weighed on the industry.

Citigroup analysts said Monday that hardware companies and distributors will face choppy enterprise demand, rising memory costs and softer PC shipments in 2026.

“Higher costs and elastic demand create a greater risk of downward revisions to earnings estimates in 2026,” Morgan Stanley said.