The IT hardware market faces a challenging 2026, with a projected slowdown due to lower enterprise demand and rising costs, a situation Reuters described as a "perfect storm." Morgan Stanley downgraded the U.S. IT hardware sector to underweight, noting that hardware budgets are seeing their lowest growth in 15 years, at just 1%. This cautious outlook underscores a broader concern across the industry.
Despite the overall market slowdown, Dell Technologies is demonstrating significant strength, particularly in its AI server orders and steady AI operating margins. Barclays upgraded Dell to Overweight on January 15, 2026, maintaining a $148 price target, recognizing Dell's robust position in providing crucial servers and storage for AI and cloud workloads. Similarly, Western Digital is experiencing strong demand for AI storage, with its stock jumping 8% as analysts expect AI data center demand to outpace supply through 2027. The company projected strong fiscal third-quarter revenue of $3.2 billion and reported a 25% jump in second-quarter revenue to $3.02 billion, indicating it is "pretty much sold out for calendar '26."
In other AI-related developments, OpenAI is reportedly seeking alternative AI chip suppliers, expressing dissatisfaction with some of Nvidia's latest chips, particularly for AI inference. This news led to a 2.9% drop in Nvidia's stock and could strain the relationship between the two major AI players. Earlier reports also mentioned broken $100 billion investment talks between them, though Nvidia's CEO Jensen Huang later confirmed a smaller investment in OpenAI's funding round.
Meanwhile, Brookfield Infrastructure is actively building out the AI backbone, with plans to expand its global data center capacity significantly and secure substantial power contracts. Aya Data secured $900,000 in seed funding to expand its AI products across Africa, focusing on agriculture with AyaGrow and local-language communication with AyaSpeech. Lemonade, an AI-powered insurer, saw its stock surge 142.9% over the past year, driven by improved financials and its AI strategy reducing costs. Fidelity Investments also offers diverse ways to invest in AI through ETFs like FTEC, FDTX, and FBOT, which include major AI names such as Nvidia.
However, not all AI news is positive for traditional tech. Wall Street is growing concerned about software stocks, fearing that artificial intelligence could disrupt the industry. This pessimism has caused software stocks, including Microsoft (MSFT), to fall, even when companies report strong earnings. Conversely, Elastic N.V. (ESTC) is drawing attention, with analysts believing it will benefit from the growing use of AI and the trend of companies consolidating their tools, leveraging its strong search and analytics capabilities.
Key Takeaways
- The IT hardware market expects a slowdown in 2026 due to lower demand and rising costs, with Morgan Stanley downgrading the sector.
- Dell Technologies shows strong performance in AI server orders and operating margins, leading Barclays to upgrade its stock to Overweight with a $148 price target.
- Western Digital's stock jumped 8% on strong AI storage demand, projecting $3.2 billion in fiscal third-quarter revenue and reporting $3.02 billion in second-quarter revenue.
- OpenAI is reportedly seeking alternative AI chip suppliers due to dissatisfaction with some of Nvidia's latest chips, causing Nvidia's stock to fall.
- Aya Data secured $900,000 in seed funding to expand its AI products, including AyaGrow and AyaSpeech, across African markets.
- Lemonade's stock surged 142.9% over the past year, driven by its AI-powered insurance model improving financials and reducing costs.
- Fidelity Investments offers three ETFs (FTEC, FDTX, FBOT) for investors to gain diverse exposure to AI, including major players like Nvidia.
- Brookfield Infrastructure is significantly investing in AI infrastructure, operating 1.2 gigawatts of data center capacity and planning for 2.4 gigawatts more.
- Fears about AI disrupting the software industry are causing software stocks, including Microsoft (MSFT), to drop despite strong earnings.
- Elastic N.V. is expected to benefit from the increasing adoption of AI and the trend of tool consolidation, leveraging its search and analytics platform.
Dell AI Servers Strong as IT Hardware Market Slows in 2026
The IT hardware market expects a slowdown in 2026 due to lower demand and higher costs. Morgan Stanley downgraded the sector to cautious. However, Dell Technologies (DELL) shows strength in AI server orders and operating margins. Barclays upgraded Dell to Overweight on January 15, 2026, maintaining a $148 price target. Dell develops and sells IT solutions, including servers and storage, for AI and cloud workloads.
Dell Technologies Leads AI Servers Amid 2026 Market Slowdown
The IT hardware market expects a slowdown in 2026 due to lower enterprise demand and rising costs. Reuters reported this "perfect storm" on January 20. Morgan Stanley downgraded the U.S. IT hardware sector to underweight. Despite this, Dell Technologies (DELL) is expected to keep its strong position in AI servers. Dell provides crucial servers and storage for AI development, which helps it stand out in the slowing market.
Dell AI Server Orders Strong Despite 2026 Hardware Market Slowdown
The IT hardware market faces a "perfect storm" in 2026 with slowing demand and rising costs. Morgan Stanley downgraded the sector to cautious. Hardware budgets are only growing 1%, the lowest in 15 years. However, Barclays upgraded Dell Technologies (DELL) to Overweight on January 15, 2026, keeping its $148 price target. Barclays noted Dell's strong AI server orders and steady AI operating margins, showing its strength in enterprise IT solutions.
Western Digital Stock Soars 8 Percent on Strong AI Storage Demand
Western Digital stock jumped 8% to $270.21 on Monday as investors focused on AI infrastructure. The company will host an "Innovation Day" on February 3, 2026, to share new plans. CEO Irving Tan stated they are "pretty much sold out for calendar '26." Analysts expect AI data center demand to outpace supply through 2027. Western Digital also projected strong fiscal third-quarter revenue of $3.2 billion and reported a 25% jump in second-quarter revenue to $3.02 billion.
OpenAI Seeks New AI Chip Suppliers Affecting Nvidia Stock
Nvidia stock fell 2.9% on Tuesday after Reuters reported that OpenAI is looking for alternative AI chip suppliers. OpenAI is reportedly unhappy with some of Nvidia's latest chips, especially for AI inference. This news could strain the relationship between the two major AI players. Earlier, Nvidia's stock also dropped due to reports of broken $100 billion investment talks with OpenAI. CEO Jensen Huang later confirmed Nvidia would join OpenAI's funding round, but with a much smaller investment.
Aya Data Raises 900K to Expand AI in African Markets
Aya Data secured $900,000 in seed funding, bringing its total funding to $1.15 million. The investment, led by 54Collective, will help expand its AI products across Africa. Founded in 2021 by Freddie Monk and Ama Larbi-Siaw, the company creates AI solutions for agriculture and local-language communication. This new capital will scale AyaGrow, an AI agriculture platform, and AyaSpeech, a speech-to-speech system for African languages.
Lemonade Stock Jumps 140 Percent as AI Drives Growth
Lemonade stock surged 142.9% over the past year, significantly outperforming the S&P 500. Privium Fund Management B.V. invested $6.94 million, buying 103,259 shares on February 2. Lemonade is an AI-powered insurer that streamlines policy and claims for customers in the U.S. and Europe. The company reported improved financials, with its gross loss ratio falling to 62% and adjusted EBITDA loss narrowing to $26 million. Lemonade also generated $18 million in adjusted free cash flow, showing its AI strategy is reducing costs.
Fidelity ETFs Offer Diverse Ways to Invest in AI
Investors are prioritizing AI investing for 2026, and innovation ETFs provide diverse exposure to this trend. Fidelity Investments offers three such ETFs: FTEC, FDTX, and FBOT. FTEC tracks a tech index with a low fee and includes major AI names like NVDA. FDTX actively invests in AI disruptors, also including NVDA. FBOT focuses on AI through automation and robotics, covering areas like big data and machine learning. Combining these ETFs allows investors to build a flexible portfolio for AI-related equities.
Brookfield Infrastructure Builds AI Backbone for Future Growth
Brookfield Infrastructure made great strides in its AI infrastructure strategy last year. The world needs $7 trillion for AI infrastructure over the next decade, covering data centers, chip manufacturing, and power. Brookfield operates 1.2 gigawatts of data center capacity globally and has plans for 2.4 gigawatts more. It also partnered with Bloom Energy for 55 megawatts of power at a U.S. data center and secured contracts for another 230 megawatts by mid-2027. The company also helped build $30 billion in U.S. semiconductor manufacturing, positioning itself as a key player in the AI revolution.
AI Fears Cause Software Stocks to Drop
Wall Street is growing worried about software stocks as fears increase that artificial intelligence could disrupt the industry. This pessimism is causing software stocks to fall, even when companies report strong earnings. For example, Microsoft (MSFT) has seen its stock affected. Despite these concerns, analysts still give IGV stock a Strong Buy rating.
Elastic Benefits From AI and Tool Consolidation
Elastic N.V. (ESTC) is an AI stock drawing attention on Wall Street. Rosenblatt analyst Blair Abernethy maintained a "Buy" rating on January 30, even while lowering the price target to $110.00. The firm believes Elastic will benefit from the growing use of AI and the trend of companies combining their tools. Elastic's platform, including Elasticsearch, helps organizations use AI by providing strong search and analytics capabilities. This comprehensive offering positions Elastic for continued growth despite economic challenges.
Sources
- IT Hardware Market Slows in 2026, Dell Technologies (DELL) Maintains AI Server Strength
- IT Hardware Market Slows in 2026, Dell Technologies (DELL) Maintains AI Server Strength
- IT Hardware Market Slows in 2026, Dell Technologies (DELL) Maintains AI Server Strength
- Western Digital stock jumps 8% as AI-storage trade revs up; what to watch next
- Nvidia stock falls as OpenAI seeks AI chip rivals By Investing.com
- Aya Data Closes $900K Seed Round to Scale AI Products for African Markets
- Lemonade’s AI Push Drives 140% Stock Surge and a Fresh $7 Million Fund Investment
- How a Trio of Innovation ETFs Offers Varied AI Investing Exposure
- The Under-the-Radar AI Infrastructure Stock You Won't Want to Miss
- Software Stocks Crater as AI Disruption Fears Scare Investors
- Elastic (ESTC) Positioned to Benefit from AI Use Cases and Tool Consolidation
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