Shares of Western Digital (WDC) surged on Monday after Morgan Stanley raised its price target to $650 from $488, maintaining an Overweight rating. The move reflects growing demand for storage solutions driven by artificial intelligence workloads in data centers.
Western Digital traded at $637.00 in early trading, up 13% from Friday's close, after briefly reaching an intraday high of $657.40. The stock has gained 197% year-to-date, approaching the new analyst target.
AI Storage Demand Fuels Rally
Investors are increasingly viewing Western Digital and its rival Seagate as key components of the AI infrastructure supply chain, rather than legacy storage companies. This shift in perception has driven significant buying interest in the sector.
Morgan Stanley's upgrade follows a series of target increases from other firms. China Renaissance raised its target to $655 on June 12, while JPMorgan moved to $650 on June 11. BofA Securities and Mizuho also increased their targets earlier this month.
Supply Constraints and Long-Term Contracts
A critical factor behind the bullish outlook is the tight supply of hard-disk drives. Western Digital's entire 2026 HDD output is already committed under multiyear contracts extending into 2028 and 2029. Similarly, Seagate has locked up most of its nearline exabyte supply through 2027. This provides both companies with unusually high revenue visibility for a sector typically considered cyclical.
Strong Financial Performance
Western Digital reported fiscal Q3 revenue of $3.34 billion, a 45% increase year-over-year. GAAP gross margin stood at 50.2%, while non-GAAP diluted earnings per share reached $2.72. The company generated free cash flow of $978 million.
CEO Irving Tan highlighted that AI workloads are driving demand, as the data generated by AI applications remains on hard-disk drives for storage.
Market Context
The rally in Western Digital shares extends beyond a simple reaction to the price target change. The stock had already risen 6.2% on Friday following an overweight rating and capacity news from a South Korean peer, which refocused attention on AI storage. Shares are now trading near the new $650 target after the latest surge.
Seagate also moved higher, trading at $999.78, as the broader storage sector benefits from the AI-driven demand narrative.
