Shares of Dell Technologies (DELL), Hewlett Packard Enterprise (HPE) and NetApp (NTAP) fell in trading on Wednesday after Barclays downgraded all three stocks, citing elevated valuations and a lack of meaningful artificial intelligence (AI)-driven growth.

Barclays analyst Tim Long lowered the ratings to Equal Weight from Overweight, adopting a more cautious outlook on IT hardware companies exposed to enterprise spending.

The bank reduced its price target on Dell to $574 from $603 and on HPE to $77 from $83, while maintaining its $219 target for NetApp.

The downgrades followed substantial gains in all three stocks over the past year, partly supported by higher memory prices that have helped boost revenue.

Barclays flags valuation concerns and limited AI growth

In a Wednesday investor report, Long said Barclays was taking a more cautious approach to companies more closely aligned with enterprise spending.

“Valuations have run, commodity costs have helped revenues, and we don’t see a meaningful AI inflection yet,” Long said.

The analyst noted that higher memory costs have contributed to revenue growth, raising questions about whether the companies can sustain their performance as prices normalise.

Long said he had entered the year positive on Dell, HPE and NetApp, believing concerns about rising memory costs were overstated.

However, he suggested that the subsequent stock gains had made valuations more difficult to justify without stronger evidence of AI-driven demand.

The concern is that revenue growth supported by higher component prices may not translate into sustained expansion if memory costs decline and demand for enterprise AI does not accelerate significantly.

Dell and HPE price targets cut as NetApp rating falls

Barclays lowered its price target on Dell to $574 from $603, despite acknowledging the company’s performance across enterprise categories.

Long said Dell’s fiscal 2027 guidance calls for revenue growth of just over 100% in enterprise servers, alongside mid-teens growth in storage and client solutions.

However, Barclays expects much of this growth to come from higher average selling prices that offset memory inflation.

The bank anticipates a meaningful slowdown in growth over the next two years as memory prices normalise and potentially decline.

For HPE, Barclays reduced its price target to $77 from $83. Long acknowledged the strength of the company’s networking business and its positioning in traditional campus networking and newer AI markets.

However, he said the improved business mix was already reflected in the stock’s valuation.

NetApp’s price target remained unchanged at $219.

Long described its cloud business as one of the strongest segments in Barclays’ coverage, noting that the company offers storage-as-a-service products through all three major hyperscaler platforms.

The business has been growing revenue by around 20%, with gross margins reaching 85%, and now accounts for 10% of NetApp’s total sales.

Barclays sees potential near-term support from NAND pricing but expects industry conditions to normalise next year.

Stocks retreat after strong gains

The downgrades weighed on all three stocks.

HPE shares fell 4.47%, while Dell declined more than 8% and NetApp dropped 4% in trading.

Despite the declines, all three stocks have recorded substantial gains over the past year.

Their advances have increased scrutiny of valuations and the sustainability of earnings growth.

Barclays’ revised targets suggest limited further upside for Dell at the cited trading levels, while its HPE target implies more room for gains. Its unchanged NetApp target sits below the stock’s reported market price.

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