Optimistic that AI-driven storage demand will continue to grow, Wells Fargo raises target prices for Seagate Technology (STX.US) and Western Digital (WDC.US)

The Zhitong Finance App learned that Wells Fargo released a research report to raise the rating of Seagate Technology (STX.US) from “hold” to “increase” and the target price from 900 US dollars to 1,100 US dollars; at the same time, maintain the Western Digital (WDC.US) “increase” rating and raise the target price from 575 US dollars to 730 US dollars.

The team led by Wells Fargo analyst Aaron Rakers said that it is expected that the upcoming results for the fourth quarter of fiscal year 2026 from Seagate and Western Digital will further strengthen the market's confidence in the industry's long-term growth logic and drive the two companies' valuations to continue to rise.

Analysts expect the two companies to reaffirm in their financial reports that, driven by demand for AI data centers, near-line hard drive shipping capacity is expected to grow by more than 25% in the long term. If the industry continues to maintain capacity discipline, the future growth rate is expected to increase further to more than 30%.

At the same time, analysts expect that the mixed average sales price of the two companies will maintain medium to high single-digit growth, and they are optimistic that the price increase from 2027 to 2028 will expand further to the low to medium double digit level. In terms of gross margin, it is expected to continue to rise above 65% in the future, and some optimists even think it is expected to break through 70%.

Furthermore, Wells Fargo believes that the profit visibility of the two companies will continue to increase in the next few years, and free cash flow will remain strong, providing sufficient support for return on capital.

Analysts pointed out that as artificial intelligence infrastructure continues to expand, demand for high-capacity storage from cloud computing service providers is still strong. Seagate and Western Digital are expected to further emphasize the continued increase in demand visibility in their financial reports, and are expected to confirm that demand for EB-grade storage will further accelerate from 2027 to 2028.

The report also said that the procurement agreements signed between the two companies and the world's major cloud service providers are still stable. These agreements are mainly based on the size of the purchase, and the price is usually determined when production begins 6 to 9 months before delivery of the product. At present, the company's cooperation plan with customers has been extended to 2030, near-line hard drive production capacity has been basically distributed to 2027, and planning for 2028 demand has begun.

Meanwhile, South Korean memory chip giant SK Hyv.US (SKHYV.US) also officially landed on NASDAQ on Friday, raising a total of 26.5 billion US dollars, setting the record for the largest IPO of a foreign company in the US capital market.