Western Digital rallies as Morgan Stanley lifts target to $650

Western Digital shares rose about 17% to $658.80 after Morgan Stanley raised its price target to $650, making the company the top performer in the S&P 500 for the session. Morgan Stanley also raised its price target on Seagate to $1,035 from $767 and kept Overweight ratings on both firms. Seagate shares climbed about 7.6% to $1,002.44. Over the past year Western Digital has gained more than 1,000% and Seagate roughly 660%.

Analyst Erik Woodring at Morgan Stanley wrote the upgrades reflect growing demand for hard disk drives driven by artificial intelligence workloads. The firm estimated HDD demand is increasing roughly 40% to 50% annually, while HDD supply growth is expected at about 30% to 35%, creating a potential supply shortfall of 10% to 15% in 2026.

Morgan Stanley said current street pricing for HDDs is about $14.30 to $14.90 per terabyte, and both companies are targeting $25 to $30 per terabyte in 2027 and 2028. The firm pointed to tighter inventories at original design manufacturers, which it said are holding only one to two weeks of HDD stock, reducing the risk of an inventory glut and supporting pricing improvements.

The brokerage highlighted Western Digital’s dual-track roadmap of UltraSMR and heat-assisted magnetic recording (HAMR). Morgan Stanley wrote HAMR qualifications with four hyperscale customers remain on track for a first-half 2027 launch and that management expects UltraSMR products to reach customers in the second half of 2026 and HAMR products in the first half of 2027.

Following meetings with Chief Executive Officer Irving Tan, Chief Financial Officer Kris Sennesael and Vice President of Investor Relations Ambrish Srivastava, Morgan Stanley said it has increased confidence in Western Digital’s outlook. Management told analysts nearline exabyte supply could grow at 30% to 35% annually over the next three to five years and that a 40% compound annual growth rate might be achievable without adding manufacturing capacity. The firm also cited accelerating capital returns and expanding gross margins.

A J.P. Morgan analyst noted Seagate has stopped offering discounts to encourage adoption of next-generation products, reflecting signs of supply constraint. Morgan Stanley’s bull-case valuations put Western Digital at $920 per share and Seagate at $1,446 per share.

“We continue to believe [hard disk drives] represent the cleanest estimate revision and re-rating story within our IT Hardware coverage,” Woodring wrote.