This article first appeared on GuruFocus.
Dell Technologies (NYSE:DELL) shares slid about 7% Thursday morning, extending Wednesday’s selloff after Barclays questioned whether AI-server demand can justify the stock’s rally.
Barclays analyst Tim Long lowered Dell to Equal Weight from Overweight and cut his price target to $574 from $603. He also downgraded Hewlett Packard Enterprise (HPE) and NetApp (NTAP), citing elevated valuations and uncertain enterprise AI adoption.
Dell had gained more than 300% in 2026 before falling 11.4% Wednesday to $507.24. AI-linked shares broadly weakened as hotter U.S. inflation data revived concerns about borrowing costs and technology spending.
Long said Dell’s gains may reflect rising memory prices more than stronger underlying demand for AI infrastructure. Higher component costs can lift server prices, but easing memory prices over the next two years could slow revenue growth.
The downgrade challenges expectations for continued gains from the AI boom. Investors will look for evidence that enterprise customers are expanding AI spending enough to support Dell’s valuation. Dell’s valuation now faces a test as investors weigh component pricing against actual AI demand.
