Under the storage supercycle, the market is going crazy for HDDs, with Citigroup betting on a "high-capacity storage duopoly" in a super bull market.

As of Tuesday's closing of the US stock market, the leading companies in the US mechanical hard drive (HDD) sector - Seagate (STX.US), which focuses on high-capacity enterprise HDD storage, and Western Digital Corporation (WDC.US) - have seen their stock prices rise by 215% and 256% respectively so far this year. According to analysts at Citigroup, these two storage companies, which are benefiting from a new and unprecedented "storage super-cycle," are showing no signs of slowing down in terms of stock price growth. Citigroup has significantly raised the 12-month target stock prices for these two storage companies, citing the continued strong demand and pricing momentum for their storage products. Not only have the stock prices of the three global leaders in storage chips - SK Hynix, Samsung Electronics, and Micron Technology, Inc. - risen by triple digits this year, but the stock price increases of the giants in enterprise data storage products have been even more robust. For example, Seagate, SanDisk, and Western Digital Corporation have seen their stock prices rise by over 200% this year, with SanDisk, the leader in enterprise SSD storage systems, seeing a staggering 500% increase. These storage chip and product line giants have outperformed the US stock market and even the global stock market by a significant margin. Why have Western Digital Corporation, Seagate, and the "new" SanDisk, which was spun off from Western Digital Corporation, emerged as the winners in this unprecedented surge in the storage chip sector? The core logic lies in the fact that the rapid development of AI data center construction is driving a surge in HBM storage demand. All three layers of the storage stack in AI data centers (hot layer-NVMe SSD, warm layer/nearline HDD, cold layer-object and backup) are expanding simultaneously. The oligopoly in the HDD industry, the rebound in the NAND cycle, and the multi-year locking of quantities by cloud providers have all led to a significant increase in the volume, pricing, and visibility of orders for these three companies. Western Digital Corporation (WDC) focuses on nearline/data center HDDs with its ePMR + UltraSMR approach, mass-producing ultra-large capacity disks such as 32TB SMR and 24TB CMR (Ultrastar DC series) for object storage and data lake super storage scenarios. This serves as the "cost-effective" supporting layer for AI training/inference, as demonstrated by Beijing Vastdata Technology. Seagate's HAMR platform (Mozaic 3+) has already mass-produced and shipped 30TB nearline disks and is advancing towards higher capacity (>30TB) nodes; HAMR leads in areal density, addressing the pain points of cloud providers in terms of "rack power consumption/cost per TB," making it a core beneficiary for AI data lakes and cold data pools. With the launch of the Gemini3 AI application ecosystem by the US tech giant Alphabet Inc. Class C last week, this cutting-edge AI software has quickly gained global popularity, driving a sudden surge in AI computing demand for Alphabet Inc. Class C. The Gemini3 series products have brought about a massive amount of AI token processing capacity, further validating the "AI boom is still in the early stages of infrastructure supply and demand imbalance" that Wall Street has been enthusiastic about. Wall Street analysts unanimously believe that storage giants such as Micron, SK Hynix, Samsung, Seagate, Western Digital Corporation, and SanDisk will be the dominant players. After all, whether it's Alphabet Inc. Class C's massive TPU/AI ASIC computing cluster or the huge NVIDIA Corporation AI GPU computing clusters purchased by tech giants such as Alphabet Inc. Class C, Microsoft Corporation, and Amazon.com, Inc., all require HBM storage systems integrated with AI chips in addition to large-scale server-level high-performance DDR5 storage devices and enterprise-level high-performance HDD/SSD. Furthermore, the three major storage chip manufacturers SK Hynix, Samsung, and Micron have focused most of their capacity on HBM storage systems - these storage products require more advanced manufacturing processes and more complex manufacturing and testing compared to DDR and HDD/SSD storage chips. As a result, the continuous shift of capacity to HBM has significantly contributed to the imbalance between supply and demand for these hard drive storage products. When physical storage in data centers cannot meet the "AI belief" of enterprises and consumers, the storage super-cycle has already begun! Considering the nearly $1.4 trillion AI computing infrastructure agreements signed by OpenAI and the progress of the "Stargate" AI infrastructure project, these super AI infrastructure projects urgently require large-scale high-performance enterprise-level storage (with HBM storage systems, enterprise SSD/HDD, server-level DDR5 storage products at their core). This growth in demand is driving up prices and the stock prices of storage giants as they benefit from the surge in demand and prices. "In a consistent supply and demand dynamic, constrained output, high prices staying flat up to the expected upper range, and continuous volume and pricing momentum extending to the 2027 calendar year, we have updated our profit expectations and target prices for Seagate and Western Digital Corporation," wrote analysts at Citigroup in a report to clients. In the latest financial report, Citigroup substantially raised the target price for Seagate from $275 to $320 and the target price for Western Digital Corporation from $180 to $200. As of Tuesday's closing of the US stock market, Seagate's stock price closed at $266.870. Western Digital Corporation's stock price closed at $159.99, indicating that, according to Citigroup, the stock price surge of these two storage giants that have repeatedly set new highs this year is far from over. Another Wall Street financial giant, Bank of America Corp, recently released a research report showing that recent channel surveys of storage chip leaders such as SK Hynix and Samsung indicate that SK Hynix continues to establish a leading edge in HBM4/4e and current HBM3e, becoming the preferred supplier for major AI computing customers such as NVIDIA Corporation, Alphabet Inc. Class C, and OpenAI. Bank of America expects traditional DRAM demand, including DDR4 and DDR5, to continue to significantly exceed supply in 2026, with large upside potential for prices and profits (for example, Bank of America expects some DRAM contract prices to have risen by over 100% this year, with another 50%+ upside over the next six months), continued optimism for NAND dominated by enterprise-level SSDs, and continuous marginal increases in contract pricing for enterprise HDDs. Bank of America predicts that this current storage super-cycle will last at least until the first half of 2027, and based on the unprecedented level of prosperity in this cycle spanning HBM3e/HBM4/4e, DRAM, and NAND series high-performance storage products, Bank of America is bullish on the two leaders SK Hynix and Samsung - believing that the stock prices of these two storage chip giants that have repeatedly set new highs can rise by at least 50% and 40%. They also believe that the global storage sector is continuing to enter a "valuation reassessment" bull market phase closely related to the super cycle. Bank of America has set a target stock price of 800,000 Korean Won for SK Hynix, which means that the potential upside for SK Hynix, which has repeatedly set new highs, in the next 12 months is as high as 50%. It's worth noting that Bank of America's given 3.6x 2026E P/B valuation is 50% higher than the peak 2x P/B of the last "cloud computing-driven storage super bull market" in 2018, indicating that this current super cycle that is expected to continue until the first half of 2027, will surpass the previous prosperity cycle in terms of intensity and duration.