What Happened?

Shares of leading data storage manufacturer Western Digital (NASDAQ: WDC) jumped 7.6% in the afternoon session after several investment banks, including Morgan Stanley and Rosenblatt Securities, significantly raised their price targets on the stock, citing a strengthening market for hard disk drives (HDDs). 

Morgan Stanley hiked its price target to $171 from $99, while Rosenblatt increased its target to $125 from $90, with both firms maintaining a 'Buy' or 'Overweight' rating. Analysts attribute the optimism to a surge in demand for data storage, driven by increased cloud infrastructure spending and accelerating investments in AI technologies. 

Rosenblatt noted that the "Age of AI runs on data" and that HDDs provide the lowest-cost solution for mass storage, predicting that demand will outstrip supply through fiscal year 2027. This positive analyst sentiment comes as Western Digital benefits from a strong HDD cycle, which has been reflected in its recent price increases across its product portfolio.

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What Is The Market Telling Us

Western Digital’s shares are very volatile and have had 20 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 7 days ago when the stock gained 4% on the news that Cantor Fitzgerald nearly doubled its price target on the stock to $160 from $85, while maintaining an Overweight rating. 

This significant adjustment signaled strong confidence from the analyst firm. The positive sentiment was part of a broader trend where the artificial intelligence boom lifted traditional storage companies. The surge in AI has increased the demand for computing infrastructure, benefiting firms like Western Digital that supply crucial storage solutions for large language models. Reflecting this trend, the company's stock had already soared 137% since the AI boom began.

Western Digital is up 85.5% since the beginning of the year, and at $114.79 per share, has set a new 52-week high. Investors who bought $1,000 worth of Western Digital’s shares 5 years ago would now be looking at an investment worth $2,919.

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