(Reuters) -Shares of Dell (NYSE:DELL) and HP (NYSE:HPQ) fell on Wednesday after the personal computer makers issued forecasts that cast doubt on a market recovery driven by artificial intelligence-enabled PCs.
Dell tumbled 11%, with the company set to shed about $11 billion from its $99.50 billion market value, after it forecast quarterly revenue below estimates.
HP dropped about 5% and its market capitalization was set to shrink by nearly $2 billion, from $37.68 billion on Tuesday, following a quarterly profit projection that was short of analysts' view.
Traditional PC demand has weakened after a post-pandemic boom, while AI-powered computers have yet to see mass adoption despite some interest from corporate and education sectors.
"We have long warned that we did not expect artificial intelligence personal computers to lead to any structural change in demand for PCs, and we think this is perhaps what the market was disappointed with," Morningstar analyst Eric Compton said.
The expected computer upgrade cycle due to Microsoft (NASDAQ:MSFT) ending support for Windows 10 and transitioning to Windows 11 has been slower than anticipated.
"Since the Windows 11 refresh has ramped slower than previous industry transitions, we expect to see the impact of the upgrade to be more pronounced in 2025," HP CEO Enrique Lores said.
For Dell, the AI server business continued to be a bright spot with revenue in the servers and networking unit jumping 58% thanks to demand for its servers from cloud companies racing to capitalize on AI.
At least three analysts each raised their PTs for Dell and HP, while one brokerage each reduced the stocks' price targets.
But some analysts warned that a slow rollout of Nvidia (NASDAQ:NVDA)'s next-generation AI chip, may hurt Dell's sales and squeeze its profit.
A design flaw in the Blackwell chips and tight manufacturing capacity for advanced semiconductors at TSMC have weighed on Nvidia's ability to ramp up production of its much-awaited processors.
"The transition to Blackwell could be impacting the time to revenues for Dell. We are concerned that these Blackwell systems will pressure gross margin percentage even further," Barclays (LON:BARC) analysts said in a note.
HP shares trade 10.84 times analysts' profit estimates, compared with 15.51 for Dell and 30.94 for Microsoft.