Rising prices are a red flag for consumers.Nobody likes paying more for a laptop or a printer. However, for investors
tracking the technology hardware sector, recent reports that DellTechnologies (NYSE:DELL) and HP(NYSE:HPQ) areraising prices on commercial products should be viewed as a bullish signal, not a warning.
The trigger for these price hikes is asharp increase in component costs. Specifically, the market is facing a
scarcity of memory chips (DRAM and NAND) and solid-state drives (SSDs).
Typically, in a weak economy, rising input costs crush profit margins because
companies lack the leverage to pass those costs on to buyers. They simply have
to eat the loss to keep sales moving.
But this time is different—Dell and HP aresuccessfully passing higher costs along to enterprise customers. This ability
to raise prices without cratering demand is a hallmark of pricing power. These
price increases are defensive moves that demonstrate industry dominance,
protecting earnings power as two massive trends, the Windows 11 refresh and
the artificial intelligence (AI) infrastructure buildout, begin to
accelerate.
The Unstoppable Commercial Refresh
Why are corporate customers acceptinghigher prices? The simple answer is that they have no choice. Corporate IT
departments are currently facing a structural deadline to upgrade aging
computer fleets. This is driven by a double-trigger event, making hardware
upgrades essential rather than optional.
- The Pandemic Echo: Computers purchased during the 2020 and 2021 rush are now reaching the end of their useful lives. Batteries are degrading, and processors are slowing down, creating a natural replacement cycle.
- The Windows 10 Sunset: Microsoft is winding down support for Windows 10. This forces businesses to upgrade to hardware compatible with Windows 11 to ensure security compliance. Corporate IT directors cannot risk running unsupported software, making demand for new hardware inelastic.
The financial data confirms that thisdemand is robust. In its third quarter, Dell reported that revenue for its
Client Solutions Group, which handles PC sales, grew 3% year-over-year (YOY).
More importantly, the commercial side of that business grew 5% to $10.6
billion, outperforming the consumer segment. HP showed even stronger momentum
in this area, with its Personal Systems commercial revenue jumping 7% in the
fourth quarter of 2025.
Beyond the operating system refresh,enterprises are future-proofing their fleets for AI. HP reported that AI PCs
(computers equipped with specialized neural processing units) already
represented more than 30% of its shipments in the fourth quarter. Companies are
prioritizing performance over price sensitivity because they need devices
capable of running AI workloads locally on the machine to ensure data privacy
and reduce cloud computing costs.
Scale as a Moat: Winning the Supply War
The root cause of the current pricingdynamic is commodity scarcity. Management at Dell has noted difficulty in
securing high-demand memory components. Interestingly, the boom in AI servers,
which require massive amounts of high-performance memory, is partly responsible
for squeezing the supply available for personal computers.
However, in the hardware market, sizematters. As two of the largest PC manufacturers in the world, Dell and HP
possess massive purchasing power and priority access to component supplies that
smaller competitors lack. This scale acts as a defensive moat, allowing them to
secure parts even when supply is tight.
HP has been transparent about the financialimpact of these rising costs. Management explicitly guided for a 30-cent
earnings per share (EPS) impact in fiscal year 2026 (FY2026) due to rising
commodity costs, with the pressure weighted toward the second half of the year.
To mitigate this, HP is pulling three specific levers:
- Strategic Pricing: Passing costs to customers where demand is strongest.
- Portfolio Redesign: Adjusting hardware configurations to optimize memory usage without sacrificing performance.
- Structural Efficiency: HP launched a new FY2026 Plan targeting $1 billion in gross run-rate savings by the end of 2028.
This efficiency plan involves using AI toautomate product development and customer support, allowing the company to
reduce its global workforce by approximately 4,000 to 6,000 employees. This
demonstrates that even if gross margins face pressure from component inflation,
HP is actively protecting its operating margins through internal efficiency.
A Tale of Two Investments: Growth vs.Income
Although both companies benefit from AIadoption and the PC upgrade cycle, their investment cases
diverge significantly.
Dell Technologies (DELL): The AI GrowthPlay
Dell has positioned itself as a primaryinfrastructure provider for the AI revolution.
While it is known for PCs, the primaryvaluation driver is now its Infrastructure Solutions Group (ISG).
- Record Performance: In the third quarter, ISG revenue surged 24% to a record $14.1 billion, driven by a 37% jump in servers and networking revenue.
- The Backlog: The demand for AI servers is immediate and massive. Dell reported a record $18.4 billion backlog and $12.3 billion in orders for the quarter.
Dell’s stock price recently dippedapproximately 6% following news of insider selling by Director Egon Durban.
While insider sales can generate negative headlines, the business’s fundamental
metrics suggest the growth trajectory remains intact. Trading at a
price-to-earnings ratio (P/E) of roughly 15.7x, Dell trades at a premium to HP,
but this is justified by its high-growth exposure to data center spending.
HP Inc. (HPQ): The Value & YieldPlay
HP is the play for investors seekingstability and income. The stock has faced pressure in 2025, down roughly 24%
year-to-date, primarily due to a decline in the print market. However, the
company remains a cash-generating machine, producing $2.9 billion in free cash
flow for the fiscal year.
- Income: HP management recently raised the quarterly dividend to 30 cents per share, resulting in a dividend yield of approximately 4.85%.
- Valuation: Trading at a discounted P/E ratio of roughly 7.9x, HP offers a significant safety
margin.
For value investors, the combination of ahigh yield, aggressive share buybacks, and the stabilizing commercial PC market
makes HP an attractive income vehicle that pays you to wait for the turnaround.
Buying the Hardware Renaissance
The hardware cycle is shifting from apost-pandemic recovery to an era of essential upgrades. Rising component prices
in 2025 are a hurdle, but Dell and HP are uniquely equipped to clear it. Their
ability to raise prices without stalling commercial revenue growth confirms
healthy demand from the corporate sector.
Whether an investor seeks the high-growthpotential of Dell’s AI infrastructure engine or the steady income reliability
of HP’s dividends, the current environment supports a bullish view on both. The
headwinds of inflation are real, but for these legacy tech giants, they are
manageable challenges that highlight their market dominance.