Data center stocks took a major hit on Monday after Morgan Stanley downgraded seven hardware companies, including Dell and Hewlett Packard Enterprise.

The bank double-downgraded Dell from overweight to underweight and downgraded HPE from overweight to equal weight.

Dell and HPE closed down 8% and 7%, respectively.

HP Inc, Asustek and Pegatron were also downgraded from equal weight to underweight, while Gigabyte and Lenovo were lowered from equal weight to overweight. All companies saw shares dip as much as 6%.

Morgan Stanley analysts wrote that computer makers are in the midst of an unprecedented pricing “supercycle,” as hyperscalers continue to accelerate data center demand, pushing hardware valuations to reach all-time highs.

Rising costs in the DRAM, dynamic random access memory, and NAND memory, a flash memory typically used in memory cards, businesses could put pressure on margins, especially as memory fulfillment rates may fall as low as 40% over the next two quarters, according to the bank.

“This as an emerging, and potentially significant, risk to CY26 earnings estimates for our Global Hardware OEM/ODM universe, where memory accounts for 10-70% of a products’ bill of materials,” analysts wrote.

Major DRAM and NAND manufacturers have been hiking prices as climbing AI infrastructure demand continues to bleed memory supplies dry. Samsung reportedly hiked the prices for its memory chips by as much as 60% since September, according to Reuters.

Analysts pointed to the memory cycle between 2016 to 2018, where NAND and DRAM spot prices increased 80% to 90%. Increased device prices were unable to offset the soaring input costs, causing original equipment and design manufacturers to experience compressed gross margins.

“During this period, we saw earnings pressure and multiple de-rating from hardware stocks with elevated DRAM exposure, lower pricing power, and narrower margins, but outperformance from companies able to pass off costs to end-customers,” analysts wrote.

Dell was highlighted as one of the hardware companies most exposed to rising memory costs, noting that the company’s gross margin contracted by 95 to 170 basis points during the last memory cycle.

The company is one of Nvidia‘s major customers and builds computers around the AI giant’s chips, which it then sells to end-users such as cloud service CoreWeave.

“This is important as history tells us that companies facing margin headwinds underperform peers with similar growth rates, but stable-to-expanding margins,” analysts wrote.

Analysts expect increased DRAM and NAND costs to weigh on the PC maker’s margins over the next 12 to 18 months.

In Google’s IPO prospectus 21 years ago, founders Larry Page and Sergey Brin gave a flattering nod to Warren Buffett, suggesting in their letter to prospective investors that the billionaire investor was a big influence.

They titled their founders’ letter, “‘An owner’s manual’ for Google’s shareholders,” and indicated that there was a footnote worth reading.

“Much of this was inspired by Warren Buffett’s essays in his annual reports and his ‘An Owner’s Manual’ to Berkshire Hathaway shareholders,” the footnote said.

More than two decades later, Buffett is showing that the admiration goes both ways. Berkshire Hathaway, Buffett’s holding company, revealed late Friday that it owns a stake in Google parent Alphabet worth roughly $4.3 billion as of the end of the third quarter, making it the firm’s 10th largest equity holding. It marks one of Berkshire’s most significant technology bets in years — Apple’s is the firm’s largest holding — and sent sent Alphabet shares up 3% on Monday.

It’s a rare move by Berkshire, which for decades has hesitated to buy into high-growth tech companies, and represents the first time the firm is known to have a stake in Google. Buffett, 95, is stepping down as CEO at the end of this year, with longtime lieutenant Greg Abel set to take the reins.

In 2017, Buffett said he regretted not buying shares in Google years earlier when Berkshire insurance subsidiary Geico was paying hefty fees for advertising on its network. He also acknowledged missing out on Amazon, which Berkshire eventually purchased in 2019, still owning $2.2 billion worth of the e-commerce shares.

Alphabet shares are up 50% this year, after Monday’s gains, trading just shy of their all-time high reached last week. The company notched its first $100 billion revenue quarter in the third period, fueled by growth in its cloud unit, which houses its artificial intelligence services. The cloud division also has a $155 billion backlog from customers and an updated line of chips that sets it apart from other AI players.

Alphabet’s valuation remains lower than many of its AI-driven megacap peers. The stock trades at about 26 times next year’s earnings, compared with Microsoft at 32, Broadcom at 51 and Nvidia at 42, according to FactSet.

Page and Brin are now ranked seventh and eighth, respectively, on the Forbes billionaires list, just behind Buffett at sixth.

The Google founders cited Buffett multiple times in the company’s IPO prospectus. In one instance, Page and Brin were effectively warning investors that quarterly financials may not always look pretty.

“In our opinion, outside pressures too often tempt companies to sacrifice long term opportunities to meet quarterly market expectations,” they wrote. “In Warren Buffett’s words, ‘We won’t “smooth” quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.'”

In explaining the logic behind a dual-class stock structure, which gave the founders outsized voting control, they cited Berkshire as one of the companies to previously and successfully implement it, along with media companies like The New York Times, the Washington Post (the newspaper now owned by Jeff Bezos) and Wall Street Journal publisher Dow Jones (now owned by News Corp.)

“Media observers have pointed out that dual class ownership has allowed these companies to concentrate on their core, long term interest in serious news coverage, despite fluctuations in quarterly results,” Page and Brin wrote. “Berkshire Hathaway has implemented a dual class structure for similar reasons.”

WATCH: Berkshire discloses new Alphabet state worth $4.3 billion.