Key Takeaways
- Bernstein elevated Western Digital to Outperform from Market Perform, raising its price target from $170 to $340.
- A sharp 21% decline was triggered by concerns surrounding Google’s TurboQuant compression technology — fears Bernstein dismisses as unfounded for HDD demand.
- The firm forecasts Western Digital and Seagate will achieve 24% compound annual revenue growth between fiscal 2025 and 2030.
- The company extended its ePMR technology timeline by one to two years, potentially indicating delays in HAMR deployment.
- Seagate remains Bernstein’s preferred play in the storage sector, with its target price increased to $620.
Despite recent volatility, Western Digital has delivered approximately 57% gains year-to-date, maintaining strong performance even after the pullback that rattled market participants.
Western Digital Corporation, WDC
The downturn started following Google Research’s introduction of TurboQuant — a compression algorithm designed for KV cache optimization during AI inference operations. Market participants worried this innovation would undermine storage product demand.
Bernstein’s Mark Newman strongly disputed this interpretation. “There is zero impact to HDD demand,” Newman stated emphatically. He further noted that TurboQuant’s influence on NAND flash storage, utilized solely for cold cache offloading, is essentially minimal.
The market response represented a significant overreaction, according to Bernstein’s analysis. Western Digital had tumbled 21% from its peak before receiving the upgrade. Industry peers Seagate and Sandisk experienced similar pressure during the selloff.
Upgraded Growth Projections for Storage Industry
Bernstein has adopted a considerably more optimistic stance on the storage sector as a whole. The investment firm now anticipates combined revenues for Western Digital and Seagate will expand at a 24% annualized rate spanning fiscal 2025 through 2030.
This represents a substantial upgrade from earlier projections of 18.7% bits growth coupled with 3.6% annual pricing erosion. The updated model incorporates 24% bits expansion with pricing remaining flat.
Newman pointed to AI computational demands, enhanced content production, extended data preservation requirements, and stricter data sovereignty regulations as driving forces behind both volume growth and improved pricing power.
From a technological standpoint, Western Digital’s 2026 Innovation Day revealed an expanded ePMR technology development path. The organization has effectively elongated its conventional drive technology roadmap beyond initial expectations by one to two years.
Questions Around HAMR Deployment Timeline
The upgrade contains an important qualification. Newman interpreted the prolonged emphasis on ePMR as an indirect indication that Western Digital‘s migration to heat-assisted magnetic recording — commonly referred to as HAMR — might be progressing slower than initially anticipated.
Bernstein’s financial model projects Western Digital will begin scaling HAMR production in 2027, representing approximately 5% of nearline exabyte shipments during that period.
This stands in sharp contrast with Seagate’s trajectory, which Bernstein forecasts will have roughly 70% of nearline volumes on HAMR technology by the identical timeframe. Seagate continues as the firm’s preferred investment choice, with its target elevated to $620 from $500.
Western Digital climbed approximately 2.3% during Wednesday’s premarket session immediately after the upgrade announcement, before expanding those gains throughout regular trading hours.
