‘An Attractive Entry Point’: Bernstein Upgrades Western Digital (WDC) Stock Following Sell-Off

On March 24, Google Research introduced TurboQuant, a caller compression algorithm said to present a 6x simplification successful KV cache representation usage and up to 8x improvements successful inference show connected Nvidia H100 GPUs, without immoderate nonaccomplishment successful accuracy. TurboQuant specifically targets the KV cache, a constituent utilized during inference alternatively than training, and does not compress exemplary weights, grooming data, oregon stored data. As a result, its interaction is mostly confined to GPU HBM and strategy DRAM, with lone a constricted secondary effect connected NAND, which is utilized for offloading acold caches. It has nary interaction connected HDD demand.

Despite the information that this has nary interaction connected HDD, the marketplace did arsenic the marketplace does and on with different representation stocks, WDC sold disconnected successful the aftermath of the news.

Now, says Bernstein expert Mark Newman, with the banal sitting 19% beneath its caller highs, the selloff has presented an “attractive introduction point.” Accordingly, Newman has upgraded his WDC standing from Market-Perform (i.e., Neutral) to Outperform (Buy), portion besides raising his terms people from $170 to $340, suggesting the banal volition summation 31% implicit the coming months. (To ticker Newman’s way record, click here)

The surge successful information generation, with AI playing a immense part, is driving beardown maturation successful retention demand. AI models are generating information astatine unprecedented standard that indispensable beryllium stored, portion grooming these systems requires ample retention capableness for progressively analyzable models, and AI-enabled video adds different furniture of demand. Total shipped retention capableness crossed NAND and HDDs grew astatine a 55% CAGR betwixt 1998 and 2013, past slowed to 14% betwixt 2013 and 2024. Newman anticipates maturation volition re-accelerate to astir 24% annually done 2030, supported by “AI workloads, richer contented creation, longer information retention requirements, and stricter information sovereignty standards.”

HDDs are expected to play a cardinal relation owed to their outgo vantage implicit NAND, which remains successful a super-cycle. Within full information halfway retention request (HDD + NAND), which Newman forecasts volition turn astatine a 31% CAGR, information halfway HDD request should emergence astatine a 25% CAGR from 2024 to 2030, successful enactment with Western Digital’s caller Investor Day presentations. With device-related HDD request mostly displaced by NAND and increasing much slowly, Newman forecasts full planetary HDD shipments volition summation astatine a 23% CAGR.