Investing.com — Bernstein upgraded Western Digital to Outperform from Market Perform, hiking its price target to $340 from $170, arguing that a sharp pullback driven by fears over Google’s new TurboQuant compression algorithm has created a buying opportunity that is disconnected from the underlying fundamentals.
The sell-off, which has taken Western Digital down 21% from recent highs, was an overreaction. Peers Seagate and Sandisk also fell.
However, Western Digital rose 2.3% in premarket trading Wednesday after the upgrade.
TurboQuant, a compression algorithm unveiled by Google Research last week, targets only the KV cache used during AI inference and has no bearing on hard disk drive demand, Bernstein said. Its impact on NAND flash memory, which is used only to offload cold caches, is described as negligible.
“There is zero impact to HDD demand,” analyst Mark Newman said in a note.
Bernstein has also grown more broadly constructive on the storage sector. The broker now expects combined revenue for Western Digital and Seagate to grow at a 24% compound annual rate (CAGR) from fiscal 2025 to 2030, supported by 24% bits growth and stable pricing.
This marks a meaningfully more optimistic outlook than prior assumptions of 18.7% bits growth and a 3.6% annual price decline.
“AI workloads, richer content creation, longer data retention requirements, and stricter data sovereignty standards are aiding both demand and average selling price (ASP),” Newman wrote.
On Western Digital specifically, the analyst was encouraged by the company’s ePMR technology roadmap presented at its 2026 Innovation Day, which effectively extends its legacy drive technology one to two years further than previously expected.
However, he read the sustained focus on ePMR as a soft signal that Western Digital’s transition to heat-assisted magnetic recording, or HAMR, may be progressing more slowly than initially planned.
Bernstein assumes Western Digital begins ramping HAMR in 2027, reaching roughly 5% of nearline exabytes shipped that year, versus approximately 70% for Seagate at the same time.
Seagate remains Bernstein’s top pick in the sector, with a reiterated Outperform rating and a price target raised to $620 from $500.
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