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US IT Hardware Stocks Tumble as Morgan Stanley Flags Slowing Demand

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U.S. IT hardware stocks fell sharply after Morgan Stanley downgraded the sector, warning that corporate demand is weakening as companies rein in spending amid economic uncertainty and rising component costs.

The brokerage cut its industry outlook to “cautious,” citing a “perfect storm” of slowing demand, input cost inflation, and elevated valuations. Analysts said technology leaders are dialing back hardware investment plans, adding pressure to a sector already grappling with supply bottlenecks.

Shares of Hewlett Packard Enterprise and Dell Technologies dropped as much as 5%, while HP Inc fell about 2.5%. U.S.-listed shares of Logitech and NetApp slid between 4% and 5.5% after Morgan Stanley cut both to “underweight.”

The sector-wide selloff dragged the U.S. IT hardware index lower, reflecting broader market weakness. Morgan Stanley’s latest survey showed hardware budgets are expected to grow just 1% year-on-year in 2026, the weakest reading outside the COVID period in roughly 15 years.

While artificial intelligence-related spending has supported some hardware demand, uncertainty linked to tariffs under U.S. President Donald Trump and rising memory costs continue to cloud the outlook. Analysts warned that higher costs and price-sensitive demand could lead to further earnings downgrades into 2026.

Wipro CEO Sees Growing Demand for India’s IT Services From AI

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Artificial intelligence is increasingly driving demand for India’s IT services, as companies move beyond pilot projects and begin rolling out large-scale AI initiatives, according to Srini Pallia, chief executive of Wipro.

Speaking on the sidelines of the World Economic Forum in Davos, Pallia said Wipro is competing for a mix of small, large, and mega AI-related deals as clients across industries adopt the technology at different stages of maturity. While pricing pressure remains intense due to faster delivery timelines and leaner teams enabled by AI, he expects the number of smaller projects to rise as adoption widens.

India’s $283 billion IT sector has faced several quarters of slower growth as global clients cut technology spending amid economic and geopolitical uncertainty. Pallia said enterprise AI spending is now shifting from experimentation to accountability, with boards and executives demanding clear returns on investment.

He added that AI-assisted software development could cut costs by about 25% through productivity gains in coding and testing, leading to more projects over time. Wipro launched a three-year, $1 billion investment plan in 2023 to strengthen its AI capabilities.

UK Weighs Australia-Style Social Media Ban for Children Under 16

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Britain is considering an Australia-style ban on social media use for children under the age of 16, as the government steps up scrutiny of how digital platforms affect young people’s mental health and development. Prime Minister Keir Starmer said children risk being drawn into “a world of endless scrolling, anxiety and comparison,” and warned that the government is ready to take robust action.

The move follows an announcement that officials will examine whether features such as infinite scrolling should be restricted and whether the current age at which children can access social media platforms is appropriate. Ministers are set to visit Australia, which last month became the first country to introduce a nationwide ban on social media for under-16s, to study how the policy is enforced. Technology Secretary Liz Kendall said Britain is considering the same age threshold.

While supporters argue that a ban would provide clear protection for children, critics warn it could push harmful activity underground or reduce access to the positive aspects of social media. The government is also reviewing stronger age-verification checks and whether the UK’s digital age of consent is too low.

Concerns have intensified amid the rapid spread of AI-generated content online, including recent reports involving xAI’s Grok chatbot generating non-consensual sexual images. Britain has already announced plans to ban AI nudification tools and remove addictive platform features, alongside enforcing the Online Safety Act, which has increased age checks and reduced access to harmful content.

Starmer said no option is off the table as the government works with experts to identify the most effective safeguards for children online.