5 Hardware Tech Stocks to Avoid Amid AI Uncertainty

On the Feb. 23 episode of The Morning Filter, David Sekera and Susan Dziubinski answer a viewer question on which commodity-oriented technology hardware companies Sekera sees as most at risk with growing market worries. Here is an excerpt from the episode.

Why These Commodity-Oriented Hardware Tech Stocks Are at Risk

Dziubinski: Our question of the week comes from Bill. Now, Bill is asking a follow-up question to our Feb. 9 episode, where Dave said that he was concerned about commodity hardware companies. Bill wants to know which companies in particular you’re concerned about, Dave, and if Emerson Electric EMR is one of them.

Sekera: Specifically, it’s those commodity-oriented technology hardware companies. And even within kind of that theme, I’d say the ones that I’m going to be most concerned about are going to be the memory semiconductors. As all of these companies for artificial intelligence have been building out their data centers, what’s happened in the past couple of months is there’s been a huge shortage of memory, specifically the high bandwidth memory, in order to support this buildout boom. So if you think about it, if you’re the construction manager and you’re building out a multibillion dollar data center, you’re not going to not let it open up on time because you didn’t have enough memory chips. You’re going to end up paying whatever you have to pay in order to be able to get to them. And so we’ve just seen prices skyrocket higher. Margins are just exploding on these. And the stock prices for those companies have just exploded higher in the past five months.

And I’ll admit, this might be a situation where we might be wrong for a while before we’re right. And we may still see further upside in some of these memory chip stocks over the short term. But again, I’m just concerned that they are really a commodity-oriented type of product. I would expect that over time, you’re going to see some behavior change. We’re already starting to see some behavior change among the players there. They’re going to be looking to convert some of their DRAM facilities to high-bandwidth memory facilities with whatever type of equipment that they have and that they can bring online very quickly. I mean, all of these companies already announced that they’re building new capacity out, and that production there should be available by mid-2027. I just note that at any point in time when there’s a hint that prices for the high bandwidth memory and for memory overall starts to come down as supply catches up, or if demand growth starts slowing, these stocks, I think, are just gonna fall faster than what they even rose.

Taking a look at some of the big players here, Micron MU, 1-star-rated stock, well into 1-star territory. Now, SanDisk SNDK, I would note, is a 3-star-rated stock after we’ve increased our fair value as much as we have. But again, I just want people to kind of realize what you have to assume going on in the industry to be able to come up with evaluations with what we have. So for SanDisk, for the past three years, revenue was kind of in a $6 billion to $7 billion range. I think it was $7 billion and change in 2025. We’re now estimating revenue to be $17 billion in 2026, coming up from $7 billion, and then to increase to $36 billion in 2027. Now we’re looking for sales then to start to slow after that, but even after they come back down a bit, we’re still modeling in an ongoing step change in revenue being permanently higher thereafter. So, we’re still looking for like $22 billion of revenue in 2030, whereas kind of before the shortage it was at that $6 billion to $7 billion run rate.

So, a couple of companies I would just highlight here would be Micron at that 1-star level being very concerning to me. Other areas that I consider would be the low-end networking equipment or optical equipment. Ciena CIEN is a 1-star-rated stock, Cisco CSCO is a 3-star-rated stock, but again, very concerned with the volatility we could see there. Things like optical cables, fiber power supplies, connectors, those kinds of commodities, also be at risk. Corning, ticker GLW, that’s a 2-star-rated stock. Non-AI servers, Hewlett Packard Enterprise HPE is a 3-star-rated stock, so it’s fairly valued based on our base case. But again, if we were to see a big selloff in the commodity-oriented sector, I think that would get pulled down with it. I would not be invested in any of the stocks that are directly related to PCs and laptops. I think they’re at risk because memory prices have moved up so much. I think that’s going to push the prices of those products back. And from there, you’d see a big pushback from enterprises in their upgrade cycle.

Getting back here to the original question, with Emerson, I would say that’s probably not in my mind a concern as far as being a commodity-oriented tech hardware. They do make products for data centers, but I think this is one where it is considered more a beneficiary of utilizing AI in their products and services. But taking a look at the stock and how much it’s run up over our fair value, I think it has been caught up in the momentum from the AI buildout boom. That stock currently trades at a 45% premium to our fair value.

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