Dell shares plummeted 11% on Wednesday and dragged down other data center equipment names on mounting concerns that enterprise spending on artificial intelligence won't justify the AI buildout.
Hewlett-Packard Enterprise, Oracle and Super Micro all joined in the downward slide.
In a report to clients on Wednesday, analysts at Barclays downgraded its rating on Dell, HPE and NetApp, "after a significant run and on enterprise AI timing."
Makers of data center servers and other backend equipment have been favored on Wall Street this year on optimism that they'll be selling huge volumes of gear tied to demand for AI chips and systems for years into the future. Dell has been one of the top performers on the market, up more than 300% this year, while HPE has jumped about 160% and NetApp has doubled.
However, sentiment toward the AI infrastructure space has shifted of late due in part to concerning revenue figures out of OpenAI and more broadly out of fear that rising interest rates will create a challenging environment as so much of the buildout is reliant on debt. Oracle, a heavy borrower, dropped 9% on Wednesday and is now down 33% for the year while neocloud CoreWeave plunged 15%, wiping out its gains for 2026.
The Barclays analysts said they haven't seen a "meaningful AI inflection" when it comes to enterprise spending for Dell, HPE and NetApp, lowering the rating on each to the equivalent of a hold from buy. They instead attribute increased revenue to the global memory shortage and noted that infrastructure companies have passed the higher price of memory along to customers.
"There is growing sentiment about enterprise AI adoption creating a hardware refresh," the Barclays analysts wrote, adding that businesses are typically allocating just 5% of their IT budgets to AI. "We believe the strong enterprise revenues are more of a function of memory costs than a move to enterprise AI at this time."
The Barclays analysts also found that only about a quarter of total enterprise AI spend is going towards hardware. They said normalizing and eventually declining memory prices could weigh on infrastructure-related revenue.
Memory is a notoriously cyclical business, and stocks were hit this week after China's ChangXin Memory Technologies, or CXMT, reported progress over the weekend on a new chip structure. Micron is down 11% for the week, while South Korea's SK Hynix has tumbled 13% in U.S. trading and Western Digital has dropped more than 8%.
WATCH: HPE isn’t Dell, but its lower valuation gives it more upside, says Jim Cramer