Barclays cuts Dell, HPE and NetApp, calling the AI hardware boom a memory price cycle

Barclays analyst Tim Long cut Dell Technologies▼−11.36% — Dell Technologies, down 11.36 percent today, Hewlett Packard Enterprise▼−8.33% — Hewlett Packard Enterprise, down 8.33 percent today and NetApp to Equal Weight from Overweight on October 14, 2026, moving three enterprise hardware names that had all more than doubled this year↗ from buy to hold on the broker's own scale ¹². Dell fell 8.8% in morning trade, HPE 5.1% and NetApp 3.5% ¹. The stated reason was blunt: "We believe the strong enterprise revenues are more of a function of memory costs than a move to enterprise AI at this time," Long wrote↗ ².

Barclays calls it memory costs, not AI demand

The seven enterprise-exposed stocks in Long's coverage are up about 140% this year against 14% for the S&P 500, and the group trades near 21 times estimated 2027 earnings versus a five-year average near 15 times ¹. Dell entered the day up 355% for 2026, HPE 186% and NetApp 123% ². He cut his Dell target↗ to $574 from $603 ¹, his HPE target to $77 from $83, and held NetApp at $219 ⁸.

Goldman sees the same cycle peaking

The same morning, Goldman Sachs economists wrote↗ that AI-driven inflation is "likely near its peak" ⁴. They put its contribution to core PCE, the Federal Reserve's preferred inflation gauge, at about 45 basis points, each basis point one hundredth of a percentage point, peaking near 50 by end-2026 and falling to 10 by end-2027, because "our sector analysts expect memory and computer prices to grow at a significantly slower pace" ⁴. September CPI↗, out the same morning, ran 3.7% against 3.4% in August, keeping pressure on a Fed that raised rates in September and may raise again this year ³⁴.

About half of that inflation effect is genuine cost pressure; much of the rest is mismeasurement in software prices ⁴⁵. The pass-through works in a straight line: memory makers set the higher prices, Dell and HPE pass them to customers as higher system prices, and the increase lands as revenue ¹. That is how a server line can triple toward $75 billion a year while its operating margins sit near 5% ¹.

Dell's filings show the pass-through

Dell's July quarter, its fiscal second of 2027, printed revenue of $47.0 billion, up 58% year over year, on $60.9 billion of AI server orders and a $95.0 billion backlog↗, booked demand rather than recognized revenue ⁶. Long models AI server revenue tripling to about $75 billion this fiscal year at roughly 5% operating margins, with possible upside to $100 billion in fiscal 2028 ¹.

The filings show where the earnings came from: gross margin of 20.9% of revenue in the July quarter against 24.7% in the quarter ended February 2024, and an 11.5% operating margin, the highest of the past three years ⁷. Operating expenses have fallen from 15.6% of revenue in fiscal 2024 toward an estimated 8% in fiscal 2027 ¹. Beats continue, Long wrote, but "the scale of the beats should become much smaller" ¹.

The backlog case, and the number that decides it

The bull case is contracted demand: a $95.0 billion backlog, company guidance implying $74 billion of AI server revenue this fiscal year ⁶, and a Street still at Buy with an average target of $599.69, barely above the price ². The deciding number is memory. If contract prices fall in 2027 as Goldman's sector analysts expect↗ ⁴, the exposed holders are those owning this group at 21 times estimated 2027 earnings on revenue that decelerates as the pass-through unwinds; Micron▼−2.99% — Micron, down 2.99 percent today and SanDisk, the memory makers, would take the pricing hit, and buyers of the machines would pay less ³. Watch memory pricing into 2027, and Dell's next print, where the backlog either converts at 5% margins or does not.