Under the storage supercycle, the market is stealing HDD, Citi is betting on a “high-capacity storage duo” super bull market

The Zhitong Finance App learned that by the close of US stocks on Tuesday, the stock prices of the two largest mechanical hard disk drive (HDD) product leaders in the US — Seagate (STX.US) and Western Digital (WDC.US), which focus on enterprise-grade high-capacity HDD storage — have risen 215% and 256% respectively this year. According to analysts at Wall Street financial giant Citi, the stock price increase of these two storage companies, which have fully benefited from a new round and unprecedented “storage supercycle,” is far from stopping. Citi drastically raised the target stock prices of these two major storage companies within 12 months. The core reason is the continued strong momentum of rising volume and price of storage products.

Since this year, not only have the stock prices of the three global memory chip leaders SK Hynix, Samsung Electronics, and Micron Technology increased by more than three digits, but enterprise-level data storage product giants have risen more than 200% this year — for example, Seagate, SanDisk, and Western Digital have all risen by more than 200% this year. Among them, SanDisk, the leader in enterprise SSD storage systems, has risen by an astonishing 500% this year. These memory chip and product line giants can be described as having greatly outperformed the US stock market and even the global stock market.

Why did the “strongest increase in history” in the memory chip sector fall on Western Digital, Seagate, and the “new” SanDisk (SanDisk) split from Western Digital? The core logic is that the AI data center construction process is in full swing not only driving a surge in demand for HBM storage, but the three tiers of AI data center storage stacks (hot-tier NVMe SSDs, warm/near-line HDDs, cold tier objects and backup) are being expanded simultaneously, while long-term supply restraint and NAND cycle recovery by the HDD industry are compounded by years of lock-up by cloud vendors, making the volume and order visibility of these three companies soar at the same time.

Western Digital (WDC)'s nearline/data center HDDs focus on the ePMR+ UltraMR route, mass-produce 32TB SMR, 24TB CMR and other ultra-large capacity disks (Ultrastar DC series), and serve object storage and data lake super storage scenarios. They are a “cost-effective” carrier layer for AI training/inference to generate large amounts of data. The Seagate (Seagate) HAMR platform (Mozaic 3+) has mass-produced and shipped 30TB near-line disks and is promoting higher capacity (>30TB) nodes; HAMR is leading the way in terms of surface density, directly hitting the “rack power/cost per TB” pain point of cloud vendors, and is a core beneficiary of AI data lakes and cold data pools.

Following the major launch of the Gemini3 AI application ecosystem by US tech giant Google last week, this cutting-edge AI application immediately became popular all over the world, driving an instant surge in demand for Google's AI computing power. As soon as the Gemini3 series products were released, they brought huge AI token processing capacity, further verifying that “the AI boom is still in the early stages of construction where computing power infrastructure is in short supply” as Wall Street called. Wall Street analysts agree that storage giants such as Micron, SK Hynix, Samsung, Seagate, Western Digital, and SanDisk will be the biggest winners.

After all, whether it's Google's huge TPU/AI ASIC computing power clusters or the massive Nvidia AI GPU computing power clusters purchased by cloud giants such as Google, Microsoft, and Amazon, they are all inseparable from HBM storage systems that require full integration of AI chips, and the large-scale purchase of server-level high-performance DDR5 storage devices and enterprise-grade high-performance HDD/SSDs to accelerate the construction or expansion of AI data centers.

Furthermore, the three monopoly memory chip manufacturers SK Hynix, Samsung, and Micron concentrate most of their production capacity on HBM storage systems -- the advanced process production capacity and manufacturing and testing complexity required for such storage products are much more complex than DDR series and HDD/SSD series memory chips, so the three major memory chip leaders are continuously migrating production capacity to HBM, which has also largely caused these hard disk storage products to be in short supply.

When physical storage in data centers cannot satisfy the “AI beliefs” of enterprises and consumers, the storage supercycle has begun!

Judging from the nearly $1.4 trillion AI computing power infrastructure cumulative agreement and the “Stargate” AI infrastructure process that OpenAI has signed, these super AI infrastructure projects all urgently require large-scale data center enterprise-grade high-performance storage (with storage products such as HBM storage systems, enterprise-grade SSD/HDD, and server-level DDR5 as the core). Growth is driving rapid growth in product demand and sales prices, as well as the stock prices of major storage companies.

“We have updated our profit expectations and target price forecasts for Seagate and Western Digital against the macro backdrop of steady supply and demand dynamics continuing to be limited, high prices that remain flat to the upper limit of expectations, and demand visibility now extended to the 2027 natural year (CY27).” Citibank analyst Asiya Merchant and others wrote in a report to clients.

“All cutting-edge AI tools are triggering a surge in the scale of new content creation, covering text/images/audio/video, speeding up the generation of huge amounts of unstructured data, which is stored, copied, and formed multiple complex versions on collaborative platforms. Seagate and Western Digital have repeatedly stated that they will minimize the scale of capital expenditure in terms of expanding original production capacity, while EB growth will be driven by the accelerated switch of customers to higher capacity storage products. The incremental information in our recent research is that pricing dynamics will continue to improve positively in 2026, and any additional supply will be released through higher yield levels, thereby driving the premium to continue to rise and further raise prices.” Citigroup analysts said.

According to information, in its latest financial report, Citigroup drastically raised Seagate's target price from 275 US dollars to 320 US dollars, and raised Western Digital's target price from 180 US dollars to 200 US dollars. As of the US stock close on Tuesday, Seagate's stock price closed at $266.870. Western Digital's stock price closed at $159.99, which means that according to Citi, the gains of these two major storage product giants, which have repeatedly reached record highs since this year, are far from over.

Another Wall Street financial giant, Bank of America, recently released a research report showing that recent channel research on memory chip leaders including SK Hynix and Samsung shows that SK Hynix continues to establish a leading edge in HBM4/4e and the current HBM3e, and has become the top priority supplier for large AI computing power customers such as Nvidia, Google, and OpenAI; Bank of America anticipates that demand for traditional DRAM, including DDR4 and DDR5, will continue to greatly exceed supply in 2026, and there is still huge room for price and profit to rise (for example, Bank of America) Some DRAM contract prices are expected to increase by more than 100% since this year, and there is still 50% + room in the next half a year or so). Long-term optimism about NAND, which is dominated by enterprise-grade SSDs, and enterprise HDD contract pricing continues to rise marginally.

Bank of America predicts that this storage supercycle will continue until at least the first half of 2027, and based on this unprecedented upward boom cycle of HBM3e/HBM4/4e, DRAM, and NAND series high-performance storage products, Bank of America is sharply bullish on the two giants Hynix and Samsung — believing that the two major memory chip giants can rise to at least 50% and 40% in stock prices, and believes that the global storage sector is continuing to enter the “valuation revaluation” bull market closely linked to the super cycle.

For SK Hynix's target share price, Bank of America gave a target share price of 800,000 won, which means SK Hynix's potential increase of 50% over the next 12 months; it is worth noting that Bank of America's 3.6x 2026E P/B valuation means that this multiple is fully 50% + higher than the 2x P/B peak of the “cloud computing-driven storage super bull market” in 2018, which means that this round is expected to continue until the first half of 2027 surpass the previous round of boom in terms of both intensity and time span cycle.