“Corporate customers’ spending can’t keep pace with investment”: AI server stocks plunge

[Financial News]

Amid a gloomy outlook that corporate customers’ AI spending would not keep pace with AI infrastructure companies’ investments, shares of AI server makers including Dell, Hewlett Packard Enterprise (HPE), Oracle and Super Micro Computer (SMCI) plunged on the 14th (local time).
Dell plunged $64.54 (11.27%) from the previous session to $507.93, while HPE fell $5.70 (8.28%) to $63.11. Oracle plunged $12.65 (8.83%) to $130.55, and SMCI likewise slid $3.29 (8.42%) to $35.78. NetApp, a data management and storage specialist, also plunged $16.81 (7.03%) to $222.20.
According to CNBC, investment bank Barclays downgraded its ratings on Dell, HPE and NetApp from “Overweight (Buy)” to “Equal Weight (Neutral)” in an analyst note that day. The reason was that, although the stocks had already risen substantially, tangible results from companies’ AI adoption and spending were not materializing as quickly as expected. Barclays stressed that there was still no “meaningful AI inflection point” in corporate customers’ spending on Dell, HPE and NetApp.
Although AI infrastructure stocks had soared, the outlook for earnings growth is weakening amid high valuations, as companies remain lukewarm about AI spending. Barclays recently said that the companies’ revenue growth was merely an illusion caused by rising memory prices, and expected growth rates to slow once memory prices normalize.
These stocks have been standouts on Wall Street because they are central to future AI demand.
Dell has surged more than 300% this year, HPE about 160%, and NetApp 100%.
But market sentiment toward AI infrastructure has turned bearish. Revenue is not growing as quickly as expected, and concerns are mounting that rising interest rates would make the financial structures of these debt-dependent companies more vulnerable. Amid these concerns, Oracle plunged nearly 9% that day, CoreWeave fell more than 15%, and Nebius and Lumentum plunged more than 10% and 9%, respectively. CoreWeave gave up all its gains for the year in that day’s sell-off.

[email protected] Song Gyeong-jae Reporter