Western Digital (NASDAQ:WDC) has been among HDD and Memory stocks representing some of the market’s best performers over the past year, benefiting from AI workloads’ rising memory needs. However, Google’s recent TurboQuant report put a spanner in the works for names in the cohort.
On March 24, Google Research introduced TurboQuant, a new compression algorithm said to deliver a 6x reduction in KV cache memory usage and up to 8x improvements in inference performance on Nvidia H100 GPUs, without any loss in accuracy. TurboQuant specifically targets the KV cache, a component used during inference rather than training, and does not compress model weights, training data, or stored data. As a result, its impact is largely confined to GPU HBM and system DRAM, with only a limited secondary effect on NAND, which is used for offloading cold caches. It has no impact on HDD demand.
Despite the fact that this has no impact on HDD, the market did as the market does and along with other memory stocks, WDC sold off in the wake of the news.
Now, says Bernstein analyst Mark Newman, with the stock sitting 19% below its recent highs, the selloff has presented an “attractive entry point.” Accordingly, Newman has upgraded his WDC rating from Market-Perform (i.e., Neutral) to Outperform (Buy), while also raising his price target from $170 to $340, suggesting the stock will gain 31% over the coming months. (To watch Newman’s track record, click here)
The surge in data generation, with AI playing a huge part, is driving strong growth in storage demand. AI models are generating data at unprecedented scale that must be stored, while training these systems requires large storage capacity for increasingly complex models, and AI-enabled video adds another layer of demand. Total shipped storage capacity across NAND and HDDs grew at a 55% CAGR between 1998 and 2013, then slowed to 14% between 2013 and 2024. Newman anticipates growth will re-accelerate to about 24% annually through 2030, supported by “AI workloads, richer content creation, longer data retention requirements, and stricter data sovereignty standards.”
HDDs are expected to play a key role due to their cost advantage over NAND, which remains in a super-cycle. Within total data center storage demand (HDD + NAND), which Newman forecasts will grow at a 31% CAGR, data center HDD demand should rise at a 25% CAGR from 2024 to 2030, in line with Western Digital’s recent Investor Day presentations. With device-related HDD demand largely displaced by NAND and growing more slowly, Newman forecasts total global HDD shipments will increase at a 23% CAGR.
Leave a Reply