Dell and HP a bellwether for hardware stocks as investors log off

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Stocks hit on concern that inflation will curb consumer spending and Fed’s effort to dampen price rises

These are tough times for hardware stocks.

In that environment, investors are turning their backs on computer makers despite their having some of the cheapest valuations in the tech sector. Instead, they’re looking to companies that are less dependent on the economic cycle to boost their sales, such as Apple and Amazon.com. Dell fell 11% last week in its biggest drop since February, while HP posted its biggest slump since May 2020. Morgan Stanley downgraded both stocks on a weaker outlook for computer and hardware spending due to rising costs. Dell was also cut at Goldman, which wrote that moderating demand among low-end consumers was enough to offset its attractive valuation.

The cautious view towards value stocks stands in contrast to the recent rebound in megacaps such as Apple, Amazon and Alphabet.com, which are seen as reliable investments for long-term growth. Growth tech stocks have risen 7% since March 14, when the Nasdaq 100 Index bottomed, while value tech has dropped 14% over the same period.The recent sell-off has made hardware stocks cheaper than they already were. Dell now sells for 7.

 

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