Morgan Stanley downgraded Hewlett Packard Enterprise to equal weight from overweight, while also cutting its price target to $15 a share from $21.
The stock fell 0.8% by the close of trading on Wednesday to $14.32.
Hardware spending plans by companies are decelerating faster than any other technology sector, with growth expected to come in at just 2.2%, said Morgan Stanley, citing surveys of U.S. and European chief information officers.
By contrast, software spending is expected to edge up 5.2%, while growth in services will expand by 4%, according to the CIO surveys.
That has clouded the short-term outlook, even as the long-term prospects for the hardware sector remain bright. New workloads like "AI/ML" and edge computing "do pull new hardware and we see service and storage companies well positioned to participate in new deployments long-term," Morgan Stanley reported.
However, slowing growth "due to waning cyclical benefits ... makes it more difficult to own hardware-heavy data center stocks" in the near term, Morgan Stanley noted.
The server and storage market currently accounts for 66% of HPE's revenue, according to Morgan Stanley.