Higher memory prices are expected to hit Dell’s PC and server markets harder in the second half of 2026 and the first quarter of 2027, according to investment bank UBS. The firm raised its share price target for Dell to $440 from $243 and increased earnings estimates for fiscal years 2027 and 2028. This follows Dell’s first-quarter earnings report, which showed 88% annual revenue growth driven by a 757% surge in AI server revenue.
The demand for HBM and DRAM memory for AI GPUs has tightened the market, pushing prices up by as much as 414% in some regions. PC manufacturers faced 110% higher memory costs in the first quarter of 2026 as they scrambled to secure supply. Counterpoint Research data suggests panic buying also boosted PC shipments in 2026.
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Dell’s first-quarter results included $43.84 billion in revenue and $4.86 in earnings per share. Net income jumped to $3.44 billion, up from $965 million a year earlier. UBS noted the company’s supply chain had so far managed significant DRAM and NAND memory price increases “deftly.” But the bank warned the cost impact will worsen in the second half of 2026 and into early 2027.
The bank highlighted the company’s margins as a key concern. It said lower gross margins could affect the company’s earnings multiple due to its revenue mix and rising component costs. While memory prices may moderate after early 2027, the bank does not expect a price drop that would ease pressure on PC, server, and storage margins for long.
During Dell’s earnings call, COO Jeff Clarke addressed rising component costs. He said inflation across materials, fuel, and memory has forced the company to rapidly reprice products. “We’re living in an inflationary environment that is changing at a rate we’ve never seen before,” Clarke said. “Everything suggests this continues.”
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DRAM and NAND pricing pressures are expected to intensify over the next two to three quarters. So far, the company’s supply chain has handled sharp increases in memory and other components. But the bank stressed the second half of 2026 and first quarter of 2027 will test the firm’s ability to absorb higher costs without squeezing margins.
The memory market’s volatility highlights concerns about the company’s long-term strategy. While AI-driven demand has boosted revenue, it has also exposed the company to risks from component shortages and price swings. The bank’s analysis suggests the company’s performance in the coming months will hinge on how well it balances cost management with market growth.
Industry observers note that the company’s reliance on high-margin AI servers may offer some buffer. But broader PC and server markets face headwinds from rising memory costs. The situation could force the company to rethink pricing models or accelerate diversification into less memory-dependent segments.
For now, the bank remains cautiously optimistic. Its raised targets reflect confidence in the company’s ability to navigate short-term challenges. However, the path ahead remains uncertain as memory prices and inflationary pressures continue to shape the tech sector’s landscape.