US IT hardware stocks fall as Morgan Stanley turns cautious on sector

• Morgan Stanley expects only 1% year-on-year growth in hardware budgets for 2026, the weakest non-COVID reading in approximately 15 years based on its latest survey
• A Morgan Stanley survey found that Value-Add Resellers expect 30-60% of customers to reduce spending on PCs, servers, and storage in response to component cost-driven price hikes
• The brokerage downgraded Logitech and NetApp to 'underweight' from 'equal-weight' and CDW Corporation to 'equal-weight' from 'overweight', warning of a 'perfect storm' of demand slowdown, input cost inflation, and elevated valuations

Summary

Morgan Stanley Downgrades IT Hardware Sector, Stocks Decline

U.S. IT hardware stocks fell sharply on Tuesday, January 20, 2026, following Morgan Stanley's sector downgrade from "in-line" to "cautious." The brokerage cited a "perfect storm" of slowing enterprise demand, rising component costs, and elevated valuations.

Stock Impact:

• Logitech and NetApp dropped 6.2% and 3.8% respectively in premarket trading after being downgraded to "underweight" from "equal-weight"
• CDW Corporation fell after a downgrade to "equal-weight" from "overweight"
• Dell, HP Inc, and Hewlett Packard Enterprise declined 2%-3%

Key Data Points:

Morgan Stanley's latest survey revealed corporate technology leaders are reducing hardware spending plans, with analysts projecting just 1% year-over-year growth in hardware budgets for 2026—the weakest non-COVID reading in approximately 15 years.

The brokerage's survey of Value-Add Resellers indicates 30-60% of customers plan to cut spending on PCs, servers, and storage due to price increases driven by component cost inflation.

Market Implications:

The downgrade signals growing concerns about enterprise technology spending amid supply chain pressures and input cost inflation. Morgan Stanley warns of increased risk for downside earnings revisions in 2026, as higher costs meet elastic demand. This cautious outlook suggests potential headwinds for the broader IT hardware sector throughout the year, particularly affecting companies reliant on enterprise customers facing budget constraints.

The sector faces mounting pressure from both supply-side cost increases and demand-side pullbacks, creating a challenging environment for hardware manufacturers and resellers.