Morgan Stanley upgrades CDW on stronger AI-driven server demand

Investing.com -- Morgan Stanley upgraded CDW Corporation to Overweight and raised price targets across several IT hardware names, arguing that enterprise server demand is proving far more resilient than expected as companies accelerate investments in AI infrastructure and data center modernization.

The brokerage said recent results from major server vendors highlighted unusually strong demand despite sharp component price inflation and supply shortages. Morgan Stanley raised its forecast for the global server market to $809 billion in 2026, up 82% year over year, and now expects robust growth to continue into 2027 as enterprises refresh infrastructure and deploy AI workloads.

While the firm stopped short of declaring a long-term “enterprise server renaissance,” it said demand is being supported by a combination of AI inferencing, infrastructure modernization, supply-constrained purchasing, and accelerated refresh cycles. Companies are increasingly bringing AI workloads on-premises to improve security, reduce latency and better control costs, helping drive stronger server spending than previously anticipated.

Morgan Stanley raised revenue and earnings forecasts for server-exposed companies including Dell Technologies, Hewlett Packard Enterprise, IBM, Ingram Micro, TD Synnex and CDW, with estimates now averaging 3%–5% above consensus for 2026 and 2027.

The brokerage identified TD Synnex as its preferred way to gain exposure to the trend but also upgraded CDW, citing its significant exposure to servers, storage and networking products, improving earnings outlook, share buybacks and discounted valuation. Morgan Stanley lifted CDW's price target to $170 from $142, while increasing TD Synnex's target to $341 from $271.

Still, the bank cautioned that a portion of current demand reflects customers pulling forward purchases amid shortages of memory, CPUs and storage components. It warned that a faster-than-expected shift toward public cloud infrastructure, easing supply constraints, or a weakening economy could eventually slow the cycle.

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