The memory boom has been great for Micron - but could hurt these other tech stocks

By Emily Bary

Morgan Stanley analysts are getting worried about potential profit pressure at Dell and HP due to surging memory prices

PC makers like HP face margin risk as memory prices explode, according to Morgan Stanley.

This year's hottest stocks include memory and storage players Micron Technology, Western Digital and Seagate Technology. But as they capitalize on swelling demand and ballooning prices, their customers could be due for some pain.

Morgan Stanley analyst Erik Woodring is specifically worried about personal-computer makers Dell Technologies (DELL) and HP (HPQ), which face a perfect storm of elevated component prices and a "tepid hardware demand backdrop." He downgraded both stocks to underweight late on Sunday.

Woodring's downgrades come in the wake of an "astonishing," roughly 160% surge in dynamic-random-access-memory prices over the last month, along with a roughly 50% rise in NAND memory prices since April 2025.

"To put these pricing moves in context with history - spot prices during the last memory supercycle - 2016-2018 - were up 80-90% over the course of 12 months," he wrote. "That means this memory cycle is more severe and happening much faster than the last cycle."

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Hyperscale cloud providers face risks, as well, from rising memory prices, but they're also helping to drive up those prices as artificial intelligence spurs greater need for high-bandwidth memory. Woodring is now concerned that the intense pricing environment could hurt margins at Dell and HP, noting that, in the last pricing boom, it took months before prices started rising and the point at which executives began calling out a negative margin impact on their earnings calls.

Dell's stock fell 8.4% in Monday's session to pace S&P 500 SPX decliners, while HP's stock was off 6.9%.

Woodring said he estimates that solid-state drives and NAND memory accounted for about 15% to 20% of the bill of materials costs within notebooks prior to the price increases. "With prices now rising by double digits, cost pressures on PC downstream could become meaningful in 2026," he wrote.

The PC market has showed unexpected momentum recently, as customers have upgraded devices partly due to a Windows end-of-life update. But Woodring said he expects margin pressures to "more than offset PC strength" for HP. He noted that the stock's price tends to be "closely correlated" with forward earnings expectations, and while the consensus calls for 9% growth in fiscal 2026, his model is looking for a 3% year-over-year decline.

As for Dell, Woodring flagged the company's "notable" traction in AI servers, which present "the most compelling revenue growth opportunity." But while AI servers are accretive to gross profits on a dollar basis, they're dilutive to margins, so that's another source of potential pressure even though the company should be somewhat able to mitigate rising memory costs.

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Dell declined to comment. A representative of HP didn't immediately respond to MarketWatch's request for comment.

Woodring noted that Morgan Stanley analysts are "vocal bulls" on Seagate (STX) and Western Digital (WDC), while Micron (MU) is the firm's top pick in the U.S. semiconductor industry.

-Emily Bary

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11-17-25 1749ET