By Hannah Pedone

Storage stocks are hot as investor appreciation builds for the companies' pricing potential

Western Digital's stock was the biggest gainer in the S&P 500 on Monday.

On a strong day for technology stocks, storage providers stood out.

Western Digital's stock (WDC) was the biggest gainer in the S&P 500 SPX on Monday, up 16%, and Seagate Technology shares (STX) rose 9%, the index's fourth-best gainer.

That was after Morgan Stanley analyst Erik Woodring raised his price target on Seagate's stock to $1,035 from $767 and lifted his target on Western Digital's stock to $650 from $488, saying that there is a growing shortage of hard disk drives, which is set to drive up prices in the coming years.

While PCs don't need hard disk drives like they used to, data centers do, and for that reason, HDDs are only growing in demand.

Woodring explained that HDD demand is strengthening due to the growing demands from cloud-computing services and also a newer source - AI inferencing.

He also noted that rising prices for NAND flash memory have helped hard-drive makers, as HDD emerges as an alternative. That's created an opportunity for Seagate and Western Digital to raise prices in a more "controlled" and "predictable" way compared to their memory peers.

Woodring said that he believes HDD demand is growing between 40% to 50% annually, while supply is growing closer to 30% to 35%. Based on his conversations in Asia, he expects shortages to continue over the next two to three years.

Woodring's top pick is Seagate, as he believes the company has a greater opportunity for margin expansion over the next three to six months. But he's "pounding the table" for both Seagate and Western Digital, he wrote in his latest note, reiterating overweight ratings on each.

Read more: AMD flirts with a $900 billion valuation after beefing up its memory technology

Last month, J.P. Morgan analyst Samik Chatterjee wrote in a note that, based on conversations with Seagate CEO Dave Mosley at a conference last month, it's clear that the transition from HDD to flash memory that occurred for PCs is unlikely to occur for data-center storage tiers. That's because overall demand for storage capacity is continuing to expand, thanks to new sources of demand like agentic AI.

Woodring wrote in a separate note that, based on his meetings with Western Digital CEO Irving Tan and CFO Kris Sennesael, it's clear that original design manufacturers, or companies that build hardware products, are working with one to two weeks of HDD inventory. These sorts of companies are Western Digital's customers.

"We believe HDD demand will remain unwavering for several years to come, and that WDC will continue to execute through this 'stronger for longer' cycle," Woodring wrote.

See also: Micron bulls are getting even more optimistic about memory trends as earnings draw closer

-Hannah Pedone

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06-15-26 1757ET