HP Inc. HPQ shares have lost 16.1% in the past month, underperforming the Zacks Computer and Technology sector’s return of 3.3%. This underperformance raises the question: Is it the right time to exit the investment or continue holding HPQ stock?

HP Inc. One Month Price Performance Chart

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Reason Behind HPQ’s Underperformance

HP’s recent slump is part of a larger tech pullback triggered by fears of an escalating tariff war and slowing economic growth.

The April 2 announcement of new U.S. tariffs has introduced a wave of uncertainty. These tariffs, which are expected to directly impact hardware imports from China, could raise costs for both suppliers and end-users in the coming quarters, thereby negatively impacting the overall demand for PCs.

Moreover, the recently announced U.S. tariff rates will increase component prices, hurting the overall demand for PCs. This is also likely to hurt HP’s margins, particularly in the Personal System segment.

However, it’s not all doom and gloom.

HP’s PC Shipment Grows in Q1

The global PC market started 2025 on a strong note, with first-quarter shipments increasing 4.9% year over year to 63.2 million units, according to the data compiled by International Data Corporation. This growth was primarily driven by strategic stockpiling by vendors and buyers to have front-loaded orders ahead of new tariffs announced by the U.S. government in early April.

All top five vendors, Lenovo LNVGY, HP, Dell Technologies DELL, Apple AAPL and ASUS, registered year-over-year growth in PC shipments. Apple witnessed the highest increase of 14.1% while Dell Technologies registered the lowest rise of 3%. PC shipments of Lenovo, HP and ASUS grew 10.8%, 6.1% and 11.1%, respectively.

With a market share of 24.1%, Lenovo holds the market-leading position, followed by HP’s 20.2%, Dell Technologies’ 15.1%, Apple’s 8.7% and ASUS’ 6.3%.

Commercial Demand to Aid HP’s Prospects

Improvement in commercial PC demand is likely to help HP stay afloat amid the current challenging macroeconomic environment. According to a report by the International Data Corporation, the demand for commercial PCs is likely to be driven by two structural tailwinds.

First, businesses are likely to refresh PCs ahead of the end of Microsoft’s Windows 10 support in October 2025. Second, rising interest in PCs equipped with on-device AI capabilities could be a major demand booster for the PC industry.

The enterprise refresh cycle and AI-enabled device innovation could provide some insulation for PC manufacturers even if consumer sentiment weakens due to pricing pressure.

Expanding AI Portfolio Aids HPQ

The AI personal computers market is rapidly growing and has ample space to offer growth to multiple players. Per a report by MarketsAndMarkets, the AI PC market is expected to witness a CAGR of 28.82% from 2024 to 2030.

To capitalize on this growth, HPQ has introduced a portfolio of innovative products, including HP OmniBook Ultra Flip 14-inch Next-Gen AI PC, HP EliteBook X 14-inch Next-Gen AI PC, Z by HP Gen AI Lab, HP OmniBook X AI PC, HP EliteBook Ultra AI PC, HP OmniBook Ultra laptop and HP OmniStudio PC in the one year.

HPQ is also boosting its Printer business with AI implementation, which is the first of its kind in the world. HP recently introduced HP Print AI, the first-of-its-kind intelligent print technology that uses AI to improve the printing experiences of people at home. To give a further boost to its Printing business, HP is increasing investments in its A3 multifunction printers. These printers are designed to disrupt the traditional $55 billion A3 copier category.

Conclusion: Hold HPQ for Now

Despite the broader tech sector's decline, HPQ shows resilience through solid PC shipment growth and expanding AI-driven innovation. While tariff pressures may weigh on margins, strong commercial demand and HPQ’s proactive AI strategy position it well for recovery. For long-term investors, holding HPQ stock could be a prudent choice as the company adapts to evolving market dynamics.

HPQ carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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