Western Digital (WDC) shares soared nearly 15% on Monday, hitting a new 52-week high of $655 and closing at $628.74, making it the top performer in the S&P 500. The surge followed a double upgrade from major Wall Street firms. JPMorgan Chase raised its price target to $650 from $530, maintaining an Overweight rating, while Morgan Stanley lifted its target to $650 from $488, reiterating an Overweight rating and calling Western Digital and Seagate its “most-favored Overweights.”
The rally was fueled by an AI-driven demand boom for hard disk drives (HDDs). Morgan Stanley projects HDD supply will fall 10% to 15% short of demand in 2026, with AI pushing annual demand growth to 40–50% while supply grows only 30–35%. This supply-demand imbalance is already strengthening pricing: Western Digital and Seagate currently sell drives at about $14.30–$14.90 per terabyte and are targeting $25–$30 per terabyte by 2027–2028.
Underpinning the bullish sentiment was Western Digital’s strong Q3 earnings. The company reported EPS of $2.72, beating the $2.39 consensus, and revenue of $3.34 billion, up 45.5% year-over-year. Net margin hit 55.29%, return on equity was 42.95%, and the quarterly dividend was raised to $0.15 per share. For Q4 2026, management guided EPS between $3.10 and $3.40.
Morgan Stanley’s Erik Woodring highlighted tightening inventories, noting that original design manufacturers hold only 1–2 weeks of HDD inventory, reducing the risk of a glut. The firm also pointed to Western Digital’s UltraSMR and HAMR technology roadmap, with HAMR qualifications on track for a first-half 2027 launch with four hyperscale customers. Morgan Stanley’s bull case values WDC at $920 and Seagate at $1,446, arguing that investors still underestimate the upside from pricing power and accelerating capital returns.
