Key Takeaways
- Bernstein raised Western Digital’s rating to Outperform from Market Perform while increasing its price target from $170 to $340.
- The stock had declined 21% amid concerns about Google’s TurboQuant compression technology — fears Bernstein dismisses as unfounded for HDD demand.
- Analysts now forecast a 24% compound annual growth rate for Western Digital and Seagate’s combined revenues between fiscal 2025 and 2030.
- The company announced an extension of its ePMR technology platform by one to two years, potentially indicating a delayed HAMR rollout.
- Seagate remains Bernstein’s preferred pick in the storage sector, with its price objective lifted to $620.
Despite the recent volatility, Western Digital maintains approximately 57% gains year-to-date.
Western Digital Corporation, WDC
The sharp decline started following Google Research’s introduction of TurboQuant — a compression technology designed to optimize KV cache during AI inference operations. Market participants worried this innovation could significantly reduce storage demand.
Bernstein’s Mark Newman firmly rejected this interpretation. “There is zero impact to HDD demand,” Newman stated in his research note. He clarified that TurboQuant’s influence on NAND flash memory remains minimal, as it only affects cold cache offloading.
According to Bernstein’s analysis, the market overreacted dramatically. Western Digital’s shares had plummeted 21% from peak levels before today’s upgrade. Fellow storage companies Seagate and Sandisk experienced similar pressure.
Bernstein Elevates Storage Sector Projections
The investment firm has adopted a significantly more optimistic stance on the entire storage industry. Bernstein now anticipates that Seagate and Western Digital will achieve a combined 24% annual revenue growth rate spanning fiscal years 2025 through 2030.
This represents a considerable upgrade from prior estimates of 18.7% bits expansion coupled with a 3.6% yearly price erosion. The updated model incorporates 24% bits growth while maintaining stable pricing dynamics.
Newman pointed to several catalysts supporting both volume growth and pricing power: expanding AI workloads, increasingly sophisticated content generation, extended data preservation requirements, and stricter data localization regulations.
Regarding product development, Western Digital’s 2026 Innovation Day revealed an expanded timeline for its ePMR technology platform. The manufacturer essentially extended its conventional drive architecture beyond initial projections by one to two years.
Questions Around HAMR Technology Adoption Timeline
The upgrade comes with an important qualification. Newman interpreted the prolonged emphasis on ePMR as an implicit indication that Western Digital‘s deployment of heat-assisted magnetic recording technology — commonly referred to as HAMR — might be progressing slower than initially anticipated.
Bernstein’s financial model projects Western Digital will commence HAMR production scaling in 2027, achieving approximately 5% penetration of nearline exabyte shipments during that period.
This timeline contrasts sharply with Seagate’s expected trajectory, where Bernstein forecasts roughly 70% of nearline volumes will utilize HAMR technology by 2027. Seagate continues to be the firm’s preferred investment in the sector, with its valuation target increased to $620 from $500.
Western Digital’s stock climbed approximately 2.3% during Wednesday’s premarket session immediately following the upgrade disclosure, before accelerating gains throughout regular trading hours.
