STX vs. WDC: Why Morgan Stanley Picked Seagate as Its No. 1 IT Hardware Stock

Five-star analyst Eric Woodring from Morgan Stanley just shook up his IT hardware rankings, picking Seagate STX +5.58% ▲ as its top stock over longtime favorite Western Digital WDC +3.11% ▲ . While both companies stand to benefit from the AI and data storage boom, he believes Seagate offers stronger growth potential, making it the top IT hardware stock to watch. In addition, Woodring reiterated Buy ratings on both stocks and raised his price targets from $468 to $582 for STX stock and from $369 to $380 for WDC.

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Overall, the memory sector stocks were up on Monday, with Seagate driving gains at 5.58%. Meanwhile, WDC, SanDisk SNDK +3.28% ▲ , and Micron MU +3.15% ▲ climbed over 3%.

Seagate and Western Digital Set to Benefit from Strong HDD Demand

Morgan Stanley’s optimism on the sector is based on steady demand for hard disk drives (HDDs), which shows no signs of slowing. Woodring highlighted that cloud computing keeps growing, and AI is creating huge amounts of data that need storage. Right now, HDDs handle about 80% of global cloud storage.

He also stated that new AI applications and complex computing tasks are driving massive data growth, keeping HDD demand strong. The bank now expects the HDD market to reach supply-demand balance in 2029, a year later than previously forecast. Since only a few companies dominate this industry, this extended timeline is good news for Seagate and Western Digital.

On the flip side, flash memory is gradually taking market share from HDDs. However, Woodring believes the shift is slow.

Why Morgan Stanley Now Favors Seagate

Looking ahead, Woodring expects Seagate’s gross profit margins to rise about 50 basis points above Western Digital’s over the next year. This advantage comes from Seagate’s quicker rollout of higher-capacity storage drives, which generate stronger profits. At the same time, many of the expected catalysts for Western Digital—such as selling its remaining SanDisk stake and closing the valuation gap with Seagate—have already taken place.

Woodring noted that the gap between Seagate and Western Digital is still modest. Overall, he remains highly confident in the HDD sector as compared to any other markets under his coverage.

STX or WDC: Which Is the Best Memory Stock, According to Analysts?

Using TipRanks’ Comparison Tool, we compared STX and WDC to see which stock analysts favor. Both stocks carry a Strong Buy rating, though upside is modest after recent price surges. Seagate’s average price target of $472.94 implies an upside of about 4.3%, while Western Digital’s target of $327.78 suggests roughly 8% potential gains.

Investors can dig deeper to decide which memory stock best fits their strategy. Below is a screenshot for reference.

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