Morgan Stanley lifts server market TAM to $809B, boosts targets on compute stocks

Investing.com -- Morgan Stanley has raised its server market total addressable market forecast to $809 billion for 2026, representing 82% year-over-year growth, as enterprise compute demand proves more resilient than expected despite significant price increases.

In a note led by analyst Erik Woodring, the bank said that while it is "not yet calling a multi-year 'Enterprise Server Renaissance,'" evidence suggests Wall Street estimates for compute-exposed names are too low for 2026 and 2027.

Morgan Stanley lifted earnings-per-share forecasts by an average of 3-5% across six enterprise compute names, including CDW, Dell Technologies, HPE, IBM, Ingram Micro and TD Synnex.

"Enterprise server demand is proving far more inelastic than expected amidst compute shortages, refresh activity, and growing AI-related infrastructure needs," Woodring wrote.

Morgan Stanley upgraded CDW to Overweight from Equal-weight, raising its price target to $170 from $142, and lifted TD Synnex's target to $341 from $271. The bank also boosted Dell's target to $477 from $448 and IBM's to $267 from $225.

TD Synnex remains Morgan Stanley's preferred way to play the theme, with analysts citing its Hyve subsidiary's exposure to the five largest global hyperscalers as a key differentiator. CDW was flagged as a laggard play with improving fundamentals.

The bank cautioned that "on-prem compute budget inflation is becoming unsustainable," leaving the duration of the current cycle uncertain beyond 2027.

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