New data shows storage is strengthening while PC demand deteriorates

Investing.com -- Morgan Stanley told clients in a note Friday that its latest value-added reseller checks point to continued strength in enterprise infrastructure spending, but with growing divergence across hardware categories.

"August VAR checks point to continued Infra strength, but trends are diverging: Storage is strengthening, Servers remain strong & well above historical levels despite a moderation vs. 30 days ago, while PCs are eroding," analyst Erik Woodring wrote.

The bank said third-quarter enterprise hardware spending is tracking in line to slightly above expectations set 30 days ago, helped by large enterprise demand, healthy mid-market spending and incremental improvement in the public sector.

That is said to support its preference for storage first, followed by servers and then PCs.

Woodring noted that storage demand is running ahead of prior expectations for the September quarter, with year-over-year growth expected to accelerate from the second quarter.

The reseller believes the momentum of recent quarters remains in the "very early stages," with accelerating data creation, AI workloads and rising capacity requirements potentially supporting a multi-year cycle.

Server demand remains exceptionally strong, though the bank flagged fewer and smaller deals and longer sales cycles than a month ago, with the moderation most pronounced in financial services.

Morgan Stanley added that it does not read this as material deterioration, noting the reseller described the current cycle as the strongest of his career and said customers are not signaling overbuilt capacity.

PCs saw the sharpest deterioration, with the reseller now expecting third-quarter growth near 6%, down from roughly 10% previously.

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