IT Hardware Sector Faces Cyclical Challenges in 2026, Opportunities Remain, Morgan Stanley Says

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IT hardware companies face growing cyclical challenges in 2026, but pockets of opportunity remain, Morgan Stanley said in a Wednesday note.

Analysts said that in H1 2025, hardware stocks faced a steep selloff due to the rapid implementation of import taxes but excitement around AI and solid growth in traditional hardware have boosted stocks to all-time highs in H2.

In 2026, Morgan Stanley said it expects higher input costs to result in significant price hikes and a growing risk of demand elasticity across enterprise and consumer markets.

The analysts also said that while there are clear tailwinds to parts of IT hardware, like HDDs and AI servers, on-premises AI spending is unlikely to "save the day" in 2026.

Morgan Stanley's top pick in the sector was Western Digital (WDC). The brokerage also has an overweight rating on Seagate Technology (STX), Apple (AAPL), TD Synnex (SNX) and Teradata (TDC). It has an underweight rating on Dell (DELL) and HP (HPQ) and an equalweight rating on Hewlett Packard Enterprise (HPE), IBM (IBM), Ingram Micro (INGM) and Sonos (SONO).

Analysts also raised the price target on Apple to $315 from $305; Seagate to $337 from $270; Teradata to $35 from $30, and Western Digital to $228 from $188. Meanwhile, Morgan Stanley lowered the price target on CDW to $177 from $191; TD Synnex to $177 from $181, and Ingram Micro to $21 from $23.

Price: 274.91, Change: +0.30, Percent Change: +0.11

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