Key Takeaways
- Bernstein elevated Western Digital to Outperform from Market Perform, raising its price target from $170 to $340.
- The stock had tumbled 21% on concerns about Google’s TurboQuant compression technology — fears Bernstein calls unfounded for HDD demand.
- The firm projects Western Digital and Seagate’s combined revenue will grow at a 24% compound annual growth rate between fiscal 2025 and 2030.
- Western Digital’s ePMR roadmap has been extended by one to two years, potentially indicating a delayed shift to HAMR technology.
- Seagate remains Bernstein’s preferred pick in the storage sector, with its price target increased to $620.
Despite recent volatility, Western Digital has delivered approximately 57% gains year-to-date, maintaining strong performance even after the pullback.
Western Digital Corporation, WDC
The selloff was triggered when Google Research introduced TurboQuant last week — a compression technology designed to optimize the KV cache during AI inference operations. Market participants worried this innovation could reduce storage demand.
Bernstein’s Mark Newman strongly contested this interpretation. “There is zero impact to HDD demand,” Newman stated in his note. He further clarified that TurboQuant’s influence on NAND flash — which only handles cold cache offloading — is minimal at best.
According to Bernstein, the market response was excessive. Western Digital had declined 21% from its recent peaks before the upgrade was announced. Competitors including Seagate and Sandisk also experienced similar downward pressure.
Upgraded Growth Projections for Storage Industry
Bernstein has adopted a more optimistic stance on the broader storage market. The investment firm now anticipates combined revenues for Western Digital and Seagate will expand at a 24% compound annual growth rate spanning fiscal years 2025 through 2030.
This represents a substantial improvement over prior estimates of 18.7% bits expansion combined with a 3.6% yearly price erosion. The updated projection incorporates 24% bits growth while maintaining price stability.
Newman identified several catalysts driving both volume and pricing strength: expanding AI computational requirements, increasingly sophisticated content production, extended data retention policies, and stricter data sovereignty regulations.
Regarding product development, Western Digital’s 2026 Innovation Day revealed an expanded ePMR technology timeline. The company has effectively prolonged its conventional drive technology platform by one to two additional years beyond earlier expectations.
Questions Around HAMR Technology Adoption
The upgrade contains an important qualification. Newman interprets the sustained emphasis on ePMR as an indirect indication that Western Digital’s migration to heat-assisted magnetic recording — referred to as HAMR — might be progressing more gradually than initially anticipated.
Bernstein’s financial model projects Western Digital will begin HAMR production scaling in 2027, achieving approximately 5% of nearline exabyte shipments during that year.
This timeline contrasts sharply with Seagate’s trajectory, which Bernstein forecasts will reach roughly 70% HAMR penetration in its nearline product mix by 2027. Seagate continues to be the firm’s preferred investment choice, with its target price elevated to $620 from $500.
Western Digital gained approximately 2.3% during Wednesday’s premarket session immediately following the upgrade disclosure, subsequently extending those gains throughout regular trading hours.
