Hard Drive Stocks Are Surging. These Analysts Think the Good Times Can Continue

Morgan Stanley analysts significantly raised price targets for Western Digital (WDC) and Seagate Technology (STX), citing "stronger for longer" demand driven by AI-related cloud infrastructure spending and growing data retention needs. This upgrade, which saw WDC's target increase to $171 and STX's to $265, propelled both stocks higher on Monday, building on their year-to-date gains of over 100% and signaling continued upside potential in the data storage sector due to burgeoning AI investment.

Analysis

Data storage stocks Western Digital (WDC) and Seagate Technology (STX) are experiencing a significant rally driven by a bullish reassessment from Morgan Stanley. The bank's analysts upgraded price targets, citing a "stronger for longer" demand cycle fueled by artificial intelligence-related cloud infrastructure spending and data retention needs. In response, WDC shares surged over 9% to approximately $116, while STX shares rose about 5% to around $227, with both stocks already having more than doubled in value since the start of 2025. The core of the thesis is that the industry is only in the "middle" of this AI-driven upturn. Morgan Stanley's new price targets underscore this conviction, lifting WDC's to a Street-high of $171 from $99 (implying 60% upside from Friday's close) and STX's to $265 from $168 (implying 22% upside). The designation of Western Digital as a "top pick" further highlights analyst preference and confidence in its position to capitalize on this secular trend.

Key Decisions for Investors

• Given the analyst's view that the AI-driven demand cycle for data storage is in its middle stages, investors could view the recent rally as fundamentally supported with potential for further upside, despite the stocks more than doubling year-to-date.
• Investors may consider prioritizing exposure to Western Digital over Seagate, reflecting its 'top pick' status, more substantial price target increase, and a significantly higher implied upside of 60% versus 22%.
• The primary factor to monitor is the continued capital expenditure on AI infrastructure by large technology firms, as any deceleration in this spending would directly challenge the 'stronger for longer' demand thesis underpinning these valuations.