Bernstein has moved Western Digital up to an Outperform rating from Market Perform and more than doubled its price target to $340 from $170, saying the recent share price weakness presents a buying opportunity. The firm framed the pullback - which sent Western Digital down about 21% from recent highs - as an overreaction prompted by market fears around Google Research's new TurboQuant compression algorithm.
The sell-off affected peers as well, with Seagate and Sandisk also registering declines. Despite that pressure, Western Digital rose 2.3% in premarket trading on Wednesday after Bernstein published its upgrade.
Bernstein emphasized that TurboQuant targets the KV cache used during AI inference and therefore does not influence demand for hard disk drives. The broker described any effect on NAND flash memory as negligible, reasoning that NAND is used primarily to offload cold caches rather than handle the inference cache targeted by TurboQuant.
"There is zero impact to HDD demand," analyst Mark Newman wrote in the note accompanying the upgrade.
Beyond the company-specific call, Bernstein has become more constructive on the storage sector as a whole. The firm now forecasts combined revenue for Western Digital and Seagate to grow at a 24% compound annual growth rate from fiscal 2025 to 2030. That outlook is underpinned by an expected 24% bits growth and stable pricing, a materially more optimistic view than prior assumptions that modeled 18.7% bits growth and a 3.6% annual decline in prices.
Newman pointed to several demand drivers that support both volume and average selling prices: AI workloads, expanded content creation, longer data retention needs, and tighter data sovereignty requirements. On Western Digital in particular, the analyst noted the company's ePMR technology roadmap presented at its 2026 Innovation Day, saying it effectively extends legacy drive technology by one to two years beyond prior expectations.
At the same time, Bernstein read Western Digital's continued emphasis on ePMR as a sign that the company's transition to heat-assisted magnetic recording, or HAMR, may be advancing more slowly than originally planned. The firm models Western Digital beginning HAMR ramp in 2027 and estimates HAMR will account for roughly 5% of nearline exabytes shipped by Western Digital that year, compared with about 70% for Seagate in the same timeframe.
Seagate remains Bernstein's top sector pick; the firm reiterated an Outperform rating for Seagate and raised its price target to $620 from $500.
The note and subsequent market reaction follow a period of investor concern about how new compression techniques could change storage architectures. Bernstein's position is that TurboQuant's narrow technical focus does not alter the core demand drivers for HDDs and only minimally affects NAND workloads tied to cold cache offload.
Separately, promotional material included in the broader coverage referenced an AI-powered stock selection product that evaluates Western Digital among thousands of companies using over 100 financial metrics. That material cited historical winners identified by the tool, but did not change Bernstein's technical or demand-related analysis.
Clear summary
Bernstein upgraded Western Digital to Outperform and raised its price target to $340, stating the market's reaction to Google Research's TurboQuant was overstated. The broker believes TurboQuant does not affect HDD demand and has only a negligible effect on NAND. Bernstein also raised its sector outlook and adjusted technology adoption assumptions for Western Digital and Seagate, favoring Seagate as its top pick.
Key points
- Bernstein upgraded Western Digital to Outperform from Market Perform and set a new price target of $340, up from $170.
- TurboQuant targets only the KV cache used during AI inference; Bernstein says this has no impact on HDD demand and negligible effect on NAND flash used for cold cache offload.
- The broker now expects combined revenue for Western Digital and Seagate to grow at a 24% CAGR from fiscal 2025 to 2030, driven by 24% bits growth and stable pricing.
Risks and uncertainties
- The timing and pace of Western Digital's transition to HAMR remains uncertain; Bernstein models a 2027 ramp and a modest initial share of nearline exabytes relative to Seagate.
- Market sentiment can swing on technical developments like compression algorithms despite analysts' views, as evidenced by the roughly 21% drop from recent highs in Western Digital's shares and declines at peers.
- Assumptions about bits growth and pricing stability underpin Bernstein's sector outlook; if those assumptions prove incorrect, revenue and margin forecasts for storage suppliers could be affected.