Changes in US stocks | Investment banks such as Dama refute Toshiba's production expansion and fear a sharp rebound, Western Digital (WDC.US) and Seagate (STX.US)

The Zhitong Finance App learned that on Monday, Western Digital (WDC.US) rose more than 7% at the beginning of the session and Seagate Technology (STX.US) rose more than 5%. On the previous trading day, news of Toshiba's hard drive production expansion triggered a correction in the sector's stock prices, and both stocks fell more than 10%. Subsequently, Morgan Stanley and Bernstein successively released research reports to refute market fears. Both agencies believed that the market was overreacting to Toshiba's production expansion news and that the actual supply impact on the industry was limited; AI proxy tasks and physical AI spawned incremental storage demand, and the tight HDD supply and demand pattern continued, maintaining Seagate and Western Digital's bullish ratings. Among them, Damo listed Seagate as the preferred target.

Through industry chain research, Morgan Stanley said that the expansion of production at the Philippine plant is a two-year planned project by Toshiba. The annual production capacity growth rate is about 30%, which is only the same as the overall supply growth rate of the industry, making it difficult to keep up with rapidly expanding market demand. Constrained by factors such as TDK and Resonac core components and poor technical routes, production expansion and implementation times are aggressive and difficult to achieve. The 30% market share mentioned in the Nikkei report is an old target, which is difficult to achieve under realistic conditions. It is reasonable to expect Toshiba's market share to rise to 12-13%. At the same time, Damo confirmed that Seagate and Western Digital have no plans to expand production, and the industry's price strategy has not been adjusted.

On the demand side, Morgan Stanley pointed out that HDD demand has accelerated in the past 1-2 months. In addition to traditional public cloud vendors, cutting-edge cloud vendors and humanoid physical AI companies have become additional procurement forces; AI agent workloads will generate a large amount of contextual data that needs to be stored for a long time, further driving hard drive consumption. The spot market price strengthened, and the spot price for non-Changxie orders reached 3-5 cents/GB, which was significantly higher than the contract price, verifying the upward pricing logic of the industry. The industry's supply gap is about 300EB in 2026, and the gap will expand to 400EB from 2027 to 2028. At the valuation level, Seagate's EPS for the 2028 benchmark scenario is 10 times PE, and the optimistic scenario is only 6.8 times; Western Digital corresponds to the 2028 benchmark scenario 8.5 times PE and 5.8 times the optimistic scenario, making the valuation attractive.

Bernstein also believes that Toshiba's expansion of production is a “big deal.” Even if the optimistic assumption is that Toshiba almost doubles its production capacity, adding Seagate and Western Digital to maintain an annual capacity growth of 25%, Toshiba's market share will only increase from 11.2% to 16.8%, which is far less than 30%. From the perspective of capital expenditure, the report mentioned that an investment of 380 million US dollars is insufficient to support large-scale doubling of production capacity; Toshiba's surface density technology is significantly lagging behind its peers, iteration of high-capacity products is lagging behind, and production expansion will be forced to add more physical platforms, greater capital pressure, and implementation risks are prominent. Bernstein reiterated the “outperforming market” rating of the two companies. Seagate's target price is 1,350 US dollars, and Western Digital's target price is 770 US dollars. It is recommended to use this stock price correction to adjust the layout.