--- title: "Barclays cuts Dell, HPE and NetApp, calling the AI hardware boom a memory price cycle" description: "Barclays' Tim Long cut Dell, HPE and NetApp to Equal Weight on October 14, calling the sector's revenue surge memory-cost pass-through rather than AI demand. The same morning, Goldman Sachs told clients that AI-driven inflation, led by memory prices, is near its peak." publisher: "The Inference" section: "Hardware" published: 2026-10-14T17:14:14.467Z modified: 2026-10-14T17:14:14.467Z canonical: https://theinference.org/article/barclays-cuts-dell-hpe-and-netapp-calling-the-ai-hardware-boom-a-memory-price-cycle language: en keywords: "Dell, HPE, NetApp, Memory, Analyst Downgrades, AI Hardware" --- # Barclays cuts Dell, HPE and NetApp, calling the AI hardware boom a memory price cycle > Barclays' Tim Long cut Dell, HPE and NetApp to Equal Weight on October 14, calling the sector's revenue surge memory-cost pass-through rather than AI demand. The same morning, Goldman Sachs told clients that AI-driven inflation, led by memory prices, is near its peak. Barclays analyst Tim Long cut [Dell Technologies](https://theinference.org/markets/companies/dell-technologies), [Hewlett Packard Enterprise](https://theinference.org/markets/companies/hewlett-packard-enterprise) and NetApp to Equal Weight from Overweight on October 14, 2026, [moving three enterprise hardware names that had all more than doubled this year](https://finance.yahoo.com/markets/stocks/articles/hpe-dell-ntap-stocks-downgraded-102255493.html) from buy to hold on the broker's own scale [1][2]. 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](https://www.msn.com/en-us/news/other/hpe-stock-and-dell-are-downgraded-no-meaningful-ai-inflection-yet/ar-AA2edNFC) [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](https://finance.yahoo.com/markets/stocks/articles/barclays-downgrades-dell-stock-sharp-140627967.html) to $574 from $603 [1], his HPE target to $77 from $83, and held NetApp at $219 [8]. *Chart: **A 355% year for Dell against a 14% market** Bar chart of 2026 share price gains: Dell 355%, HPE 186%, NetApp 123%, S&P 500 14%* *Share price gains in 2026 through the October 13 close; S&P 500 gain as cited by Barclays. Sources: Barron's [2]; Benzinga via Yahoo Finance [1]. [1][2]* ## Goldman sees the same cycle peaking The same morning, [Goldman Sachs economists wrote](https://www.msn.com/en-us/money/economy/ai-driven-inflation-has-peaked-goldman-sachs/ar-AA2ed5ew) 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](https://finance.yahoo.com/video/cpi-hits-3-7-goldman-150100404.html), 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 [3][4]. About half of that inflation effect is genuine cost pressure; much of the rest is mismeasurement in software prices [4][5]. 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](https://finance.yahoo.com/technology/ai/articles/dell-dell-reports-60-9b-172135958.html), 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]. *Chart: **The AI ramp lifted Dell's operating margin, not its gross margin** Line chart of Dell's gross margin and operating margin, percent of revenue, eight quarters from Q3 2024 to Q2 2026* *Percent of revenue by calendar quarter; Dell's fiscal labels run one year ahead, so Q2 '26 is its fiscal Q2 2027. Source: Dell SEC filings [7]. [7]* ## 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](https://www.msn.com/en-us/money/general/here-s-how-much-the-ai-boom-is-contributing-to-inflation-according-to-goldman-sachs-calculations/ar-AA2edwnZ) [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](https://theinference.org/markets/companies/micron) 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. ## Takeaway Barclays reads Dell, HPE and NetApp's surge as memory-cost pass-through, not AI demand; with margins thin and Goldman calling AI inflation near its peak, memory pricing into 2027 decides whether the group's doubled valuations hold. ## Sources 1. [Benzinga via Yahoo Finance, Sam Boughedda, 'Barclays downgrades Dell stock after sharp rally', 14 October 2026](https://finance.yahoo.com/markets/stocks/articles/barclays-downgrades-dell-stock-sharp-140627967.html) 2. [Barron's via MSN, Kit Norton, 'Dell stock and HPE are downgraded. No meaningful AI inflection yet.', 14 October 2026](https://www.msn.com/en-us/news/other/hpe-stock-and-dell-are-downgraded-no-meaningful-ai-inflection-yet/ar-AA2edNFC) 3. [Yahoo Finance, Brian Sozzi, 'CPI hits 3.7%, but Goldman Sachs sees AI prices peaking', 14 October 2026](https://finance.yahoo.com/video/cpi-hits-3-7-goldman-150100404.html) 4. [Yahoo Finance via MSN, Brian Sozzi, 'AI-driven inflation has peaked: Goldman Sachs', 14 October 2026](https://www.msn.com/en-us/money/economy/ai-driven-inflation-has-peaked-goldman-sachs/ar-AA2ed5ew) 5. [MarketWatch via MSN, Jules Rimmer, 'Here's how much the AI boom is contributing to inflation, according to Goldman Sachs calculations', 14 October 2026](https://www.msn.com/en-us/money/general/here-s-how-much-the-ai-boom-is-contributing-to-inflation-according-to-goldman-sachs-calculations/ar-AA2edwnZ) 6. [Insider Monkey via Yahoo Finance, Jeff Lewis, 'Dell (DELL) Reports $60.9B of AI Server Orders and a $95B Backlog', 10 September 2026](https://finance.yahoo.com/technology/ai/articles/dell-dell-reports-60-9b-172135958.html) 7. [Dell Technologies, quarterly figures from its SEC filings, retrieved 14 October 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001571996) 8. [StockTwits via Yahoo Finance, Prabhjote Gill, 'HPE, DELL, NTAP Stocks Downgraded, Barclays Sees No Meaningful AI Inflection', 14 October 2026](https://finance.yahoo.com/markets/stocks/articles/hpe-dell-ntap-stocks-downgraded-102255493.html) --- Barclays cuts Dell, HPE and NetApp, calling the AI hardware boom a memory price cycle — The Inference. Canonical: https://theinference.org/article/barclays-cuts-dell-hpe-and-netapp-calling-the-ai-hardware-boom-a-memory-price-cycle