(Reuters) – Shares of Hewlett Packard Enterprise slumped 20% in premarket trading on Friday, after the AI-server maker said its annual profit forecast would be hit by U.S. tariffs in an intensely competitive market.
U.S. President Donald Trump imposed 25% tariffs on imports from Canada and Mexico, but exempted some goods from both the countries under a North American trade pact until April 2. His additional 10% duty on Chinese goods — on top of the 10% tariff he levied on February 4 — took effect on Tuesday.
HPE’s comments show that tariffs, though only implemented this week, are already affecting U.S. corporations. Analysts have said the uncertainties surrounding the escalating trade war could cause prices to rise across exposed sectors, including technology and autos.
“Recent tariff announcements have created uncertainty for our industry, primarily affecting our server business,” CFO Marie Myers said on a post-earnings call on Thursday. “We are working on plans to mitigate these impacts through supply chain measures and pricing actions.”
The company also said it would cut jobs to trim costs, at a time it faces intense competition from rivals Dell and Super Micro Computer amid rising demand for AI servers.
“Our impression is that these are temporary issues. After updating our forecasts, we expect a rough second and third quarter, but a recovery in the fourth quarter,” Morningstar analyst Eric Compton said in a note.
The companies that sell AI-optimized servers are grappling with margin pressures due to their costly production and rapid transition to the demand for more powerful chips.
“In AI, our margins were affected by the transition to new GPUs and managing older GPU inventory,” Myers said.
HPE currently trades at 8.19 times the estimates of its earnings for the next 12 months, compared with 9.74 times for Dell and 10.71 times for Super Micro Computer.
The company was set to lose more than $4 billion in market value, if premarket losses hold.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Shilpi Majumdar)
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