Barclays Calls Time on the Enterprise Hardware Rally: Dell, HPE and NetApp Downgraded, With No 'Meaningful AI Inflection' Yet

Barclays has cooled on enterprise hardware. Analyst Tim Long downgraded Dell Technologies, Hewlett Packard Enterprise and NetApp to Equal Weight from Overweight on Wednesday, arguing that valuations have risen too far and that he does not "see a meaningful AI inflection yet" for companies tied to enterprise spending. All three stocks fell, with Dell hit hardest after a rally of about 355% this year through Tuesday.

The calls

The new targets tell their own story. Barclays' $574 target for Dell sits just 0.3% above Tuesday's close, and its $219 target for NetApp, which was maintained, is about 8% below it. The HPE target implies about 12% upside from Tuesday's close, the most of the three. Tuesday closes match the day's moves and Stocktwits' figures. Price targets are as reported by Stocktwits and Investing.com. One list of analyst calls showed HPE's target as $219, the same as NetApp's, which looks like a data error, so we used Stocktwits' $83 to $77.

Why Barclays turned cautious

Long's central point is valuation. The seven enterprise-exposed stocks he follows are up an average of about 140% this year, against roughly 14% for the S&P 500, and the group trades at about 21 times estimated 2027 earnings versus a five-year average near 15 times, per Investing.com.

He also sees the rally as leaning on pricing rather than a fundamental shift. Commodity costs, particularly memory, have supported revenue, and Long attributes much of Dell's gain this year to the company offsetting memory-cost inflation by raising prices. As memory prices normalize and potentially decline, he expects growth to slow meaningfully over the next two years. "We don't see a meaningful AI inflection yet," Barclays said, per Stocktwits.

The note was not all negative. Long still sees upside to earnings estimates, but says "the scale of the beats should become much smaller," which may limit further gains. He sees Dell's AI server operating margins stabilizing around 5%, and his model has AI server revenue tripling to $75 billion this fiscal year, with possible upside to his $100 billion fiscal 2028 estimate, though growth should slow.

The reaction

The selloff deepened after the open. In premarket trading HPE fell nearly 4% while Dell and NetApp each fell nearly 3%, per Stocktwits; by mid-morning Dell had dropped more than 7%. Later in the morning Dell was down about 7.3% at $530.50 and HPE down about 5% at $65.38, while NetApp was down about 3.6%. The three stocks have been huge winners, up about 355%, 186% and 123% this year through Tuesday for Dell, HPE and NetApp respectively, so downgrades on valuation have a lot of gains to chip away at. Stocktwits retail sentiment turned bearish on all three.