U.S. IT Hardware Stocks Plunge Amid Morgan Stanley Downgrade

U.S. IT hardware stocks suffered a significant drop after Morgan Stanley downgraded its assessment of the industry. Concerns over declining enterprise demand, rising component costs, and potential budget cuts have led to lowered ratings for companies like Logitech and NetApp. Analysts forecast minimal growth in hardware budgets by 2026.

U.S. IT hardware stocks plunged on Tuesday as Morgan Stanley downgraded its view on the industry, citing potential drastic cuts in company spending budgets as enterprise demand wanes and component costs soar. Shares of Logitech and NetApp saw premarket trading drops of 6.2% and approximately 3.8%, respectively, following the brokerage's move to reduce their ratings to 'underweight' from 'equal-weight'.

Morgan Stanley also adjusted its rating on CDW Corporation to 'equal-weight' from 'overweight', resulting in a 2.1% decline in its shares. Meanwhile, Dell Technologies, HP Inc, and Hewlett Packard Enterprise experienced declines of between 2%-3%.

Warning of a 'perfect storm' of decelerating demand, input cost inflation, and high valuations, Morgan Stanley analysts urged a defensive stance as they downgraded their North American IT Hardware industry outlook to 'cautious'. Reports indicated that corporate technology leaders are scaling back hardware spending plans, adding to existing issues like input cost inflation and supply shortages. Analysts predict just 1% year-on-year growth in hardware budgets by 2026, the lowest non-COVID figures in 15 years, sparking the sector downgrade. Value-Add Resellers anticipate 30-60% of customers will reduce spending on PCs, servers, and storage due to price increases driven by component cost inflation.

(With inputs from agencies.)