What Happened?
Shares of computer hardware and IT solutions company Dell (NYSE: DELL) fell 6.9% in the morning session after Morgan Stanley issued a double downgrade on the stock, cutting its rating from 'Overweight' to 'Underweight' and slashing its price target.
The investment bank lowered its price target to $110 from $144. The downgrade stemmed from concerns over rising costs for memory components, like DRAM and NAND chips, which have surged in price. Analysts also pointed to softening demand for traditional hardware and a shift toward AI servers that have lower profit margins. Due to these pressures, Morgan Stanley reduced its future gross margin and earnings per share forecasts for Dell, signaling a more pessimistic outlook on the company's earnings potential heading into 2026.
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What Is The Market Telling Us
Dell’s shares are very volatile and have had 20 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock dropped 3.7% as investors continued to question how much more the superstar stocks can add to their already spectacular gains. The main story? Investors are cashing in on a good run and feeling a bit cautious. After a fantastic run, many of those high-flying AI and technology stocks saw investors take profits: selling shares to lock in their gains. This is often called a "market rotation." Money is moving out of the red-hot tech sector (which some worry has become too expensive) and into other parts of the market that investors may currently deem more stable or reasonably-priced.
There's a secondary reason for the cautious mood: The long government shutdown came to an end. Though it's typically interpreted as good news, it also means a flood of delayed economic reports will be released. For weeks, investors were "flying blind" without key updates on the economy's health, like inflation data and the jobs report. In typical "sell the news" fashion, investors may also be taking profits and selling in anticipation that the new data would potentially give the Federal Reserve reasons to slow or even pause future rate cuts.
Dell is up 7.2% since the beginning of the year, but at $124.92 per share, it is still trading 24.2% below its 52-week high of $164.88 from October 2025. Investors who bought $1,000 worth of Dell’s shares 5 years ago would now be looking at an investment worth $1,841.
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