Hard disk drive makers Seagate Technology and Western Digital are already among this year's top-performers in the S&P 500 — but analysts at Morgan Stanley see more room for both stocks to run.
Shares of both companies jumped Monday after Morgan Stanley analyst Erik Woodring sharply increased his price targets for the rival companies. Morgan Stanley's price target for Seagate is now 265, up from 168, while Western Digital is 171, up from 99. Woodring rates both stocks at overweight, or buy.
Seagate stock jumped nearly 6% to 230.11 in morning trades. Western Digital was up more than 9% at 116.74.
"While we've been hard disk drive (HDD) bulls for the better part of two years, HDD demand has recently inflected — the result of strengthening cloud infrastructure spending ($3 trillion through 2028), accelerating investments in data-enabling technologies, and AI inferencing, both agentic and multimodal, emerging as an incremental tailwind to data-rich media generation and data retention needs," a team of Morgan Stanley analysts led by Woodring wrote to clients Monday.
The hard disk drive market is up to 10% undersupplied, by Woodring's estimates. That is driving higher prices and make it easier to forecast demand through the first half 2027.
That level of demand is helping boost the views that hard disk drive makers can be considered AI stocks.
"We are making an important call with this report — that HDD stocks are no longer the growth-challenged, highly-cyclical commodities of the last 20+ years," Woodring wrote. "Data is the oil that will keep AI running, and it's become increasingly clear that HDD's are the oligopoly that will benefit from the vast amounts of data storage needed to power AI."
If more investors take the view that the HDD market is less cyclical, Woodring added, both Seagate and Western Digital can command higher price-to-earnings multiples than their historical averages.
Seagate Stock Up 168% Year-To-Date
With Monday's early gains, Seagate stock is ahead 168% this year. Western Digital is ahead 160% year-to-date. Among S&P 500 stocks, only Robinhood Markets has posted a larger overall year-to-date gain. Robinhood joined the benchmark index on Sept. 22.
Seagate stock has an IBD Composite Rating of 98 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Seagate's score places it second in the overall Computer-Data Storage group tracked by IBD. Western Digital is third, also with an IBD Composite Rating of 98.
It has been a strong year overall for the group. Computer-Data Storage ranks third out of 197 industry groups tracked by IBD, based on six-month price performance. The group is ahead 40% overall year-to-date.
Memory chip maker Micron Technology is the top ranked stock in the group with a perfect score of 99. Micron stock was up 5% in Monday trading at 164.62. The company's shares have rallied 96% this year.
Another strong performer in the group is Sandisk. Western Digital completed a spinoff this year of Sandisk, splitting its hard disk drive and flash memory businesses. Sandisk stock was ahead 12% at 109.11 in recent action Monday. Shares of the company have rallied more than 200% since it began trading on the Nasdaq in February.
