Key Takeaways:
- Morgan Stanley raised WDC target to $650 and STX to $1,035
- HDD supply to fall 10% to 15% short of AI-driven demand in 2026
- Pricing targets of $25 to $30 per terabyte by 2027 and 2028
Back
Morgan Stanley lifts Western Digital target to $650 on HDD supply crunch
Morgan Stanley raised its price target on Western Digital to $650 and Seagate to $1,035, citing a structural HDD supply deficit driven by AI data demand.
"HDDs represent the cleanest estimate revision and re-rating story within our IT Hardware coverage," Erik Woodring, analyst at Morgan Stanley, said.
Woodring reiterated Overweight ratings on both companies. The firm projects HDD supply will fall 10% to 15% short of demand in 2026, with AI-fueled demand growing 40% to 50% annually versus supply growth of 30% to 35%. Original design manufacturers currently hold only one to two weeks of HDD inventory, limiting inventory glut risk, according to Morgan Stanley.
Western Digital surged 16% to $653.53 on Monday, making it the top performer in the S&P 500. Seagate rose 9.4% to $1,018.80. The stocks have gained more than 1,000% and 660%, respectively, over the past year.
Western Digital and Seagate currently price hard drives at $14.30 to $14.90 per terabyte. Both companies are targeting $25 to $30 per terabyte by 2027 and 2028, Morgan Stanley said. Even modest pricing growth would translate to stronger revenue, wider margins, and larger buybacks than Wall Street currently projects.
J.P. Morgan analyst Samik Chatterjee noted that Seagate has stopped offering discounts to encourage adoption of next-generation products, reflecting ongoing supply constraints.
Morgan Stanley also highlighted Western Digital's dual-track UltraSMR and HAMR technology roadmap. The products remain on track for a second-half 2026 and first-half 2027 launch, with HAMR qualifications at four hyperscale customers expected in the first half of 2027.
The upgrade signals that AI-driven storage demand is creating durable pricing power in a historically cyclical industry. Investors will watch for HDD pricing data and hyperscale qualification updates through the second half of 2026.
This article is for informational purposes only and does not constitute investment advice.
[1] Western Digital, Seagate Stocks Keep Soaring. They're Morgan Stanley's Top Picks. - Barron's[2] Western Digital stock surges as Morgan Stanley lifts target to $650[3] Western Digital sees bullish views at Morgan Stanley on HDD demand, HAMR roadmap[4] Why Western Digital’s stock was the S&P 500’s biggest gainer on Monday[5] Western Digital, Seagate stocks keep soaring. Why they’re Morgan Stanley’s top picks.
