Overview
Morgan Stanley moved aggressively to lift its valuations on the two leading hard disk drive manufacturers after recent fieldwork in Asia suggested the HDD market is entering a prolonged period of tighter supply and firmer pricing. In a client note, analyst Erik Woodring increased Seagate Technology's price target to $1,035 from $767 and raised Western Digital's target to $650 from $488, keeping Overweight ratings on both names and retaining Seagate as the firm's "Top Pick."
Evidence from Asia checks
Woodring said checks carried out over the prior three weeks show both strengthening and broadening demand across the HDD market. He wrote that the checks make clear the HDD cycle is elongating and that greater shortages are now expected to persist through at least CY28. The research team concluded HDD pricing is "clearly, and meaningfully, strengthening."
Demand-supply dynamics and pricing
Morgan Stanley's modeling places HDD demand growth in the 40% to 50% range annually, while expected supply growth is nearer 30% to 35%. The firm attributes the resulting gap to the shortages projected to last through at least CY28. The note cites current nearline pricing at under $15 per terabyte, while Taiwan-based checks indicate vendors are targeting pricing of $25 to $30 per terabyte over the next two to three years.
Earnings and upside scenarios
Even using base-case assumptions that the firm describes as more conservative than its checks, fiscal 2028 EPS estimates for both companies are now roughly 70% above Street consensus, Morgan Stanley said. Under the most bullish pricing scenario outlined by the bank, it believes both Seagate and Western Digital could deliver a tenfold increase in EPS between calendar 2025 and calendar 2028.
Drivers of demand
The firm pointed to two principal drivers observed during its Asia trip. First, core cloud services are outperforming, accompanied by rising demand tied to inferencing and agent-related workloads. Second, vendors are introducing higher-capacity drives at a time of "parabolic NAND price hikes," which has increased vendor conviction to raise HDD prices in a more orderly fashion compared with memory peers.
Positioning within IT hardware and valuation
Morgan Stanley described HDDs as "our still-most-preferred area of AI exposure" within IT hardware. The bank argued that valuations, based on its 2027 EPS estimates, range from 11x to 18x across base and bull cases and remain "undemanding."
Implications
For investors and market participants focused on IT hardware, cloud infrastructure and storage providers, the note suggests potentially meaningful upside to revenue and earnings if the cited demand and pricing trends persist. The analysis relies on Asia checks and a set of pricing scenarios that underpin the firm's revised targets and bullish earnings outlook.