TLDR
- Bernstein upgraded Western Digital to Outperform from Market Perform, doubling its price target to $340.
- The recent 21% pullback was driven by fears over Google’s TurboQuant compression algorithm — which Bernstein says has no impact on hard disk drive demand.
- Bernstein now expects combined revenue for Western Digital and Seagate to grow at a 24% CAGR from fiscal 2025 to 2030.
- Western Digital’s ePMR technology roadmap was extended one to two years, though this may signal slower progress on its HAMR transition.
- Bernstein’s top pick in the sector remains Seagate, with a price target raised to $620.
Western Digital’s year-to-date performance now stands at roughly 57%, even after the recent dip that spooked investors.
Western Digital Corporation, WDC
The sell-off began after Google Research unveiled TurboQuant last week — a compression algorithm that targets the KV cache used during AI inference. Investors feared it would dent demand for storage products.
Bernstein analyst Mark Newman pushed back hard on that view. “There is zero impact to HDD demand,” Newman wrote. He added that TurboQuant’s effect on NAND flash memory, used only to offload cold caches, is negligible.
The market’s reaction was an overreaction, Bernstein argued. Western Digital had fallen 21% from recent highs before the upgrade. Peers Seagate and Sandisk were also caught in the downdraft.
A More Optimistic Outlook for Storage
Bernstein is now more bullish on the storage sector overall. The firm expects combined revenue for Western Digital and Seagate to grow at a 24% compound annual rate from fiscal 2025 to 2030.
That’s a meaningful step up from previous assumptions of 18.7% bits growth and a 3.6% annual price decline. The revised forecast assumes 24% bits growth with stable pricing.
Newman cited AI workloads, richer content creation, longer data retention, and tighter data sovereignty rules as tailwinds for both demand and average selling prices.
On the product side, Western Digital’s 2026 Innovation Day highlighted an extended ePMR technology roadmap. The company effectively pushed its legacy drive technology one to two years further than previously expected.
HAMR Transition Pace in Question
There’s a caveat buried in the upgrade. Newman read the continued focus on ePMR as a soft signal that Western Digital’s transition to heat-assisted magnetic recording — known as HAMR — may be moving more slowly than originally planned.
Bernstein’s model assumes Western Digital begins ramping HAMR in 2027, reaching around 5% of nearline exabytes shipped that year.
That compares starkly with Seagate, which Bernstein expects to have about 70% of its nearline shipments on HAMR by the same year. Seagate remains the firm’s top pick, with its price target raised to $620 from $500.
Western Digital rose around 2.3% in premarket trading Wednesday following the upgrade announcement before extending gains through the session.
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