Investing.com -- Dell Technologies Inc. shares fell over 12% in morning trading Wednesday, reaching a session low of $397.69, amid a broader AI selloff in the sector led by stocks like SK Hynix and SanDisk, as well as concerns about artificial intelligence demand and company-specific margin pressures.

The company, which manufactures Nvidia-based AI servers, faced selling pressure after reports emerged that Meta Platforms is developing a plan to lease surplus AI training and inference capacity to enterprise customers. This development raised questions about whether hyperscale cloud providers may have over-built infrastructure, which could slow future AI server orders for system integrators like Dell.

Rising memory costs are also seen as adding pressure to Dell's profit margins. AI-optimized servers already carry lower gross margins compared to the company's traditional hardware products.

GF Securities recently downgraded the stock to Hold, pointing to valuation concerns after shares rallied roughly 200% and reached a forward price-to-earnings ratio near 34 times. The downgrade contributed to Wednesday's decline as market sentiment shifted.