After a year where anything tied to AI infrastructure seemed to go straight up, it's tempting to say the memory-and-storage trade is tapped out.
Western Digital Corp. (NASDAQ:WDC), Seagate Technology Holdings plc (NASDAQ:STX) and Sandisk Corp. (NASDAQ:SDNK) have each logged returns of more than 230% over the past 12 months — the kind of move that usually screams warnings like “overbought” or "late cycle."
But analysts at Bank of America indicate the rally may be less about momentum and more about a structural setup: AI-driven demand is still outrunning supply, keeping pricing firm and leaving room for another leg higher.
BofA Says Memory And Storage Stocks Can Still Run From Here
On Tuesday, Bank of America analyst Wamsi Mohan reiterated Buy ratings on both Western Digital Corp. and Seagate Technology, while lifting his price objectives to reflect improving fundamentals across the storage cycle.
For Western Digital, Mohan raised his price target from $197 to $257, implying 16% upside from current prices. He attributed the move to "increased confidence in revenue growth and margin expansion," along with "increased confidence in positive estimate revisions over the longer term."
BofA expects WDC to ship more than 200 exabytes per quarter throughout calendar 2026, with top-line growth supported by AI, cloud, and storage-intensive enterprise workloads.
"We see pricing stable or higher," Mohan said. "Demand continues to outpace supply, and $/terabyte is flat to up year over year."
Gross margins are expected to rise every quarter in 2026, reaching about 50%. Management sees 20% compound annual demand growth, backed by long-term purchase agreements. Five key customers have already locked in orders through the end of 2026, with one extending visibility into 2027.
BofA expects 2026 revenue to rise 25% year over year to $11.9 billion, while earnings per share jump 56% to $7.87. Estimates for 2027 and 2028 EPS were also raised to $9.91 and $10.93, respectively.
The bank highlighted that Western Digital has multiple customers placing purchase orders covering all of 2026, with some forecasts extending into 2027.
For Seagate, Mohan boosted his target from $320 to $400, implying 22.6% upside. His rationale was straightforward: "demand strong, supply constrained, pricing momentum continues."
BofA expects Seagate to post a strong fiscal second quarter, with continued strength in data center demand offsetting softer legacy end markets. The bigger story, in BofA's view, is that Seagate's pricing power is persisting because the company is effectively operating in a tight-capacity environment.
"STX is basically running at max utilization," Mohan wrote, adding that any incremental supply the company is able to bring online "can be sold at market price (higher than contract price)" — a setup that can extend upside surprises even after a major run.
Margins are also expected to keep climbing. BofA sees gross margin expanding sequentially in every quarter of fiscal 2026, with incremental margins staying elevated.
On product momentum, BofA highlighted Seagate's ramp in HAMR, estimating shipments of about 40 exabytes of HAMR in the quarter and roughly 1.3 million HAMR units, with multiple global cloud service providers already qualified on its Mozaic platform and additional qualifications expected in the first half of 2026.
Bottom Line
Bank of America's message is that the storage trade isn't "done" simply because the stocks are already up sharply. Rather than signaling overheating, this corner of the AI infrastructure buildout may still be in the early stages of a structural upcycle.
Analysts point to earnings power that is still building: volumes are rising, pricing remains firm, and margins are expanding quarter after quarter.
As long as AI-driven infrastructure demand continues to outpace supply, the setup looks less like a late-cycle hardware peak and more like a scarcity-driven infrastructure cycle — one where upside is still driven by fundamentals.
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