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The investment bank sees HDD demand growth of 40-50% annually as AI infrastructure spending accelerates, raising its price target on the stock to $650
Morgan Stanley has singled out Western Digital as a major winner in the rapidly expanding market for data storage hardware, driven by insatiable demand from AI workloads and cloud computing. The firm raised its price target on WDC from $488 to $650 while maintaining an Overweight rating, a vote of confidence that sent the stock climbing.
The core thesis is straightforward: hard disk drives are experiencing a demand renaissance, and Western Digital is one of only two companies on the planet that makes them at scale.
The supply-demand math favoring HDDs #
Morgan Stanley’s analysts project annual HDD demand growth of 40-50%, a pace that meaningfully outstrips supply growth, which they estimate at 30-35%.
The demand surge stems from hyperscale data centers and cloud service providers that need massive, cost-effective storage for the tidal wave of data generated by AI applications. While SSDs grab most of the headlines for speed, HDDs remain the workhorse for bulk data retention.
Morgan Stanley describes the current HDD market cycle as being in its “middle phase,” suggesting the best may still be ahead.
Western Digital’s stock responded accordingly, gaining between 7% and 16% following the June report.
Why AI needs old-school hard drives #
For cold and warm storage, where data sits until it’s needed for retraining or analysis, HDDs offer dramatically lower cost per terabyte. When you’re a hyperscaler buying storage by the exabyte, that cost difference adds up to real money. Morgan Stanley also highlighted upcoming product innovations that should extend the HDD’s relevance. UltraSMR, or Shingled Magnetic Recording, and HAMR, Heat-Assisted Magnetic Recording, are two technologies expected to push capacity and performance further. These advances allow HDD makers to keep scaling capacity without proportionally scaling costs, keeping them competitive against SSDs in bulk storage applications.
Western Digital and the competitive landscape #
The HDD market is effectively a duopoly. Western Digital and Seagate Technology are the only two major manufacturers left standing after decades of industry consolidation. Morgan Stanley flagged both companies as top beneficiaries of the AI storage trend.
Western Digital completed a significant corporate restructuring not long ago, separating its flash memory (SSD) business from its HDD operations. That split was designed to give investors a cleaner way to bet on each storage technology independently.
Morgan Stanley’s analysis implies that the market hasn’t fully priced in how durable this HDD demand cycle could be, with potential additional upside as the market evolves through 2026 and beyond.
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