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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.

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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.

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Here are 4 major moments that drove the stock market last week

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December 13, 2025

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Here are 4 major moments that drove the stock market last week

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Oracle says there have been ‘no delays’ in OpenAI arrangement after stock slide

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December 12, 2025

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Oracle says there have been 'no delays' in OpenAI arrangement after stock slide

Oracle CEO Clay Magouyrk appears on a media tour of the Stargate AI data center in Abilene, Texas, on Sept. 23, 2025.

Kyle Grillot | Bloomberg | Getty Images

Oracle on Friday pushed back against a report that said the company will complete data centers for OpenAI, one of its major customers, in 2028, rather than 2027.

The delay is due to a shortage of labor and materials, according to the Friday report from Bloomberg, which cited unnamed people. Oracle shares fell to a session low of $185.98, down 6.5% from Thursday’s close.

“Site selection and delivery timelines were established in close coordination with OpenAI following execution of the agreement and were jointly agreed,” an Oracle spokesperson said in an email to CNBC. “There have been no delays to any sites required to meet our contractual commitments, and all milestones remain on track.”

The Oracle spokesperson did not specify a timeline for turning on cloud computing infrastructure for OpenAI. In September, OpenAI said it had a partnership with Oracle worth more than $300 billion over the next five years.

“We have a good relationship with OpenAI,” Clay Magouyrk, one of Oracle’s two newly appointed CEOs, said at an October analyst meeting.

Doing business with OpenAI is relatively new to 48-year-old Oracle. Historically, Oracle grew through sales of its database software and business applications. Its cloud infrastructure business now contributes over one-fourth of revenue, although Oracle remains a smaller hyperscaler than Amazon, Microsoft and Google.

OpenAI has also made commitments to other companies as it looks to meet expected capacity needs.

In September, Nvidia said it had signed a letter of intent with OpenAI to deploy at least 10 gigawatts of Nvidia equipment for the San Francisco artificial intelligence startup. The first phase of that project is expected in the second half of 2026.

Nvidia and OpenAI said in a September statement that they “look forward to finalizing the details of this new phase of strategic partnership in the coming weeks.”

But no announcement has come yet.

In a November filing, Nvidia said “there is no assurance that we will enter into definitive agreements with respect to the OpenAI opportunity.”

OpenAI has historically relied on Nvidia graphics processing units to operate ChatGPT and other products, and now it’s also looking at designing custom chips in a collaboration with Broadcom.

On Thursday, Broadcom CEO Hock Tan laid out a timeline for the OpenAI work, which was announced in October. Broadcom and OpenAI said they had signed a term sheet.

“It’s more like 2027, 2028, 2029, 10 gigawatts, that was the OpenAI discussion,” Tan said on Broadcom’s earnings call. “And that’s, I call it, an agreement, an alignment of where we’re headed with respect to a very respected and valued customer, OpenAI. But we do not expect much in 2026.”

OpenAI declined to comment.

WATCH: Oracle says there have been ‘no delays’ in OpenAI arrangement after stock slide

Oracle says there have been 'no delays' in OpenAI arrangement after stock slide

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AI order from Trump might be ‘illegal,’ Democrats and consumer advocacy groups claim

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December 12, 2025

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AI order from Trump might be ‘illegal,’ Democrats and consumer advocacy groups claim

“This is the wrong approach — and most likely illegal,” Sen. Amy Klobuchar, D-Minn., said in a post on X Thursday.

“We need a strong federal safety standard, but we should not remove the few protections Americans currently have from the downsides of AI,” Klobuchar said.

Trump’s executive order directs Attorney General Pam Bondi to create a task force to challenge state laws regulating AI.

The Commerce Department was also directed to identify “onerous” state regulations aimed at AI.

The order is a win for tech companies such as OpenAI and Google and the venture firm Andreessen Horowitz, which have all lobbied against state regulations they view as burdensome. 

It follows a push by some Republicans in Congress to impose a moratorium on state AI laws. A recent plan to tack on that moratorium to the National Defense Authorization Act was scuttled.

Collin McCune, head of government affairs at Andreessen Horowitz, celebrated Trump’s order, calling it “an important first step” to boost American competition and innovation. But McCune urged Congress to codify a national AI framework.

“States have an important role in addressing harms and protecting people, but they can’t provide the long-term clarity or national direction that only Congress can deliver,” McCune said in a statement.

Sriram Krishnan, a White House AI advisor and former general partner at Andreessen Horowitz, during an interview Friday on CNBC’s “Squawk Box,” said that Trump is was looking to partner with Congress to pass such legislation.

“The White House is now taking a firm stance where we want to push back on ‘doomer’ laws that exist in a bunch of states around the country,” Krishnan said.

He also said that the goal of the executive order is to give the White House tools to go after state laws that it believes make America less competitive, such as recently passed legislation in Democratic-led states like California and Colorado.

The White House will not use the executive order to target state laws that protect the safety of children, Krishnan said.

Robert Weissman, co-president of the consumer advocacy group Public Citizen, called Trump’s order “mostly bluster” and said the president “cannot unilaterally preempt state law.”

“We expect the EO to be challenged in court and defeated,” Weissman said in a statement. “In the meantime, states should continue their efforts to protect their residents from the mounting dangers of unregulated AI.”

Weissman said about the order, “This reward to Big Tech is a disgraceful invitation to reckless behavior
by the world’s largest corporations and a complete override of the federalist principles that Trump and MAGA claim to venerate.”

In the short term, the order could affect a handful of states that have already passed legislation targeting AI. The order says that states whose laws are considered onerous could lose federal funding.

One Colorado law, set to take effect in June, will require AI developers to protect consumers from reasonably foreseeable risks of algorithmic discrimination.

Some say Trump’s order will have no real impact on that law or other state regulations.

“I’m pretty much ignoring it, because an executive order cannot tell a state what to do,” said Colorado state Rep. Brianna Titone, a Democrat who co-sponsored the anti-discrimination law.

In California, Gov. Gavin Newsom recently signed a law that, starting in January, will require major AI companies to publicly disclose their safety protocols. 

That law’s author, state Sen. Scott Wiener, said that Trump’s stated goal of having the United States dominate the AI sector is undercut by his recent moves. 

“Of course, he just authorized chip sales to China & Saudi Arabia: the exact opposite of ensuring U.S. dominance,” Wiener wrote in an X post on Thursday night. The Bay Area Democrat is seeking to succeed Speaker-emerita Nancy Pelosi in the U.S. House of Representatives.

Trump on Monday said he will Nvidia to sell its advanced H200 chips to “approved customers” in China, provided that U.S. gets a 25% cut of revenues.

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