US Stocks Movement | Investment Banks Such as Morgan Stanley Refute Toshiba Expansion Panic, Western Digital (WDC.US) and Seagate (STX.US) Rebound Sharply

According to Jinse Finance, on Monday, Western Digital (WDC.US) surged over 7% at market open, while Seagate Technology (STX.US) rose over 5%. In the previous trading session, news of Toshiba's hard drive production expansion caused a pullback in sector stock prices, with both stocks dropping more than 10%. Subsequently, Morgan Stanley and Bernstein released research reports, countering market panic. Both institutions believe that the market has overreacted to the news of Toshiba’s expansion, which will have limited actual impact on industry supply; AI agent tasks and physical AI are creating incremental demand for storage, the tight supply-demand situation in the HDD sector will continue, and both Seagate and Western Digital maintain bullish ratings—Morgan Stanley lists Seagate as its top pick.

After conducting industry chain visits and research, Morgan Stanley stated that the expansion of Toshiba’s Philippine factory has been planned for two years, with annual production capacity expected to increase by about 30%, merely keeping pace with the overall industry supply growth and struggling to catch up with rapidly growing market demand. Constrained by core components from TDK and Resonac, and lagging technical routes, the expansion timeline is rather aggressive and realization is challenging. The 30% market share mentioned in Nikkei reports reflects outdated targets that are difficult to achieve under current conditions—Morgan Stanley expects Toshiba’s market share to rise only to 12‑13%. Morgan Stanley also confirmed that Seagate and Western Digital have no additional expansion plans at present, and industry pricing strategies remain unchanged.

On the demand side, Morgan Stanley pointed out that HDD demand has accelerated over the past 1‑2 months. Beyond traditional public cloud providers, emerging cloud service firms and physical AI companies are becoming new buyers. AI agents’ workloads generate massive contextual data that needs persistent storage, further driving hard drive consumption. Spot market prices are strengthening, with current spot quotes for non-long-term contract orders reaching 3‑5 cents/GB, significantly higher than contract prices, validating the industry’s upward pricing logic. The industry supply gap is expected to reach about 300EB by 2026, expanding to 400EB in 2027‑2028. In terms of valuation, Seagate’s 2028 base scenario EPS corresponds to a 10x PE, with the optimistic scenario only 6.8x; Western Digital’s base scenario is an 8.5x PE for 2028, and the optimistic scenario is 5.8x, both offering attractive valuations.

Bernstein also considers Toshiba’s expansion “much ado about nothing.” Even under optimistic assumptions of Toshiba nearly doubling capacity, with Seagate and Western Digital maintaining 25% annual capacity growth, Toshiba’s market share would only rise from 11.2% to 16.8%, far short of 30%. From a capital expenditure perspective, the reported $380 million investment is insufficient to support large-scale doubling of capacity; Toshiba’s areal density technology lags significantly behind its peers, iterations of high-capacity products are delayed, and expansion will require more physical disks, which increases capital pressure and highlights execution risks. Bernstein reiterated its “outperform” rating for both companies, with a target price of $1,350 for Seagate and $770 for Western Digital, advising investors to take advantage of this price pullback to build positions.