HomeMarket NewsThe Data Storage Device Revival: Riding High on the AI Wave

The Data Storage Device Revival: Riding High on the AI Wave

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The surge of the artificial intelligence (AI) wave has been a boon for companies in the computer and technology realm, with Nvidia Co. NVDA leading the pack with its dominant 90% share of GPUs. Essential for AI operations is not only heavy-duty processing power but also copious amounts of data for training AI models. This insatiable demand for data storage has driven up revenues for Micron Technology Inc. MU, the manufacturer of DRAM, NAND, and flash memory chips. Riding this wave are the data storage device companies that rely on these memory storage chips to meet the escalating demand in their operations. Among these beneficiaries are two prominent data storage device makers, whose fortunes are now soaring.

Western Digital: Resurgence Amid the AI Boom

Western Digital Co. WDC specializes in manufacturing hard disk drives (HDDs) and solid-state drives (SSDs). A stalwart in the data storage industry, the company has been making strides in the SSD domain following its acquisition of flash drive producer SanDisk in 2016. Their product portfolio spans from traditional HDDs, mechanical storage devices catering to bulk data storage, to SSDs, renowned for their speed and reliability afforded by their lack of moving parts.

Apart from consumer storage devices like SSDs, USB drives, and external hard drives, Western Digital also crafts data center storage systems. The onset of the AI wave has brought about a surge in their business, prompting the company to announce plans for the separation of its HDD business, specializing in traditional HDs and mechanical storage solutions, from its Flash business, focusing on NAND flash memory, into two distinct entities.

AI-Driven Reinvigoration: Reaping the Fruits

Western Digital’s performance in fiscal Q2 2024 showcased an EPS loss of 69 cents, outperforming analyst estimates of a $1.12 loss by 43 cents. Although revenues experienced a 2.4% YoY decline to $3.03 billion, this figure still surpassed consensus projections of $3 billion. The heightened demand for data storage devices prompted the company to revise its forward guidance, signaling a positive trajectory.

Elevated Projections: A Testament to Success

Looking ahead to fiscal Q3 2024, Western Digital raised its forecast, anticipating an EPS ranging from a loss of 10 cents to a profit of 20 cents, greatly surpassing estimates of a 31 cent loss. Revenue projections also saw an uptick, predicted to climb from $3.20 billion to $3.40 billion, beating consensus estimates of $3.15 billion.

Surpassing Expectations: A Positive Outlook

At the Morgan Stanley Technology, Media & Telecom Conference on March 5, 2024, Western Digital’s CEO, Goeckeler, revealed that the company had exceeded its fiscal Q3 2024 EPS guidance, reporting 20 cents against consensus estimates of 9 cents. Goeckeler highlighted the outstanding NAND gross margin, underscoring substantial progress in the HDD business, particularly in the United States with the resurgence of hyperscalers and remarkable growth in the Chinese HDD segment.

Goeckeler added, “Our current projections indicate that we are likely to surpass our estimated high end. With each business demonstrating enhanced profitability and a commendable uptick in gross margin across the board, we expect to exceed our earnings per share forecast for this quarter.”

Analyst’s Affirmation: Recognizing Potential

Prompted by positive developments, Evercore initiated coverage on Western Digital with an Outperform rating and set a price target of $80.

For more insights into Western Digital’s analyst ratings and price targets, visit MarketBeat. Explore peer and competitor stocks using the MarketBeat stock screener.

Ascending with Precision: Daily Stair Step Bull Flags

A closer look at WDC’s daily candlestick chart unveils the presence of stair-step bull flag formations. This series of three consecutive bull flags each achieve higher highs. Following the peak at $65.92 on March 6, 2024, a recent bull flag was formed, descending to $58.47 before ascending sharply to $69.36. The daily Relative Strength Index (RSI) is poised for a rebound from the 70-band, with support levels noted at $63.72, $58.47, $54.79, and $52.89.

Seagate Technology: Pioneering Innovation in Data Storage

Seagate Technology plc STX stands at the forefront of the HDD segment in the United States. Constantly pushing the boundaries of HDD technology, the company aims to narrow the speed and efficiency gap with SSD offerings at a more cost-effective price point. Despite HDD’s complexity, its significantly higher capacity compared to SSD at more affordable rates remains a compelling advantage. Nevertheless, the speed and storage requirements of AI applications lend an advantage to SSD technology, emphasized by the performance of industry players like Pure Storage Inc. PSTG and Hewlett Packard Enterprise Co. HPE.

Revolutionizing Storage: Introducing HAMR Technology

Seagate Technology is set to unveil its groundbreaking heat-assisted magnetic recording (HAMR) technology, promising a threefold increase in HDD storage capacity. This innovative technology enhances storage density on traditional HDDs by doubling or tripling area density, significantly boosting storage on a single platter.

HAMR’s potential capacity ranges from 5 to 10 Terabytes per square inch (Tbps), dwarfing the current 1 to 2 Tbps capacity. By employing a laser to heat a small area within the hard drive, HAMR facilitates data writing in a markedly smaller space, revolutionizing storage capabilities. Uncover AI-backed insights on MarketBeat.

Empowering Future Storage: The Mozaic 3+ HDD Platform

Incorporating HAMR technology, Seagate has integrated the innovation into its Mozaic 3+ HDD platform to achieve capacities surpassing 30TB. Collaborating with Sony Inc. SONY for laser diode technology, the Mozaic 3+ platform aims to drive data storage density to 3TB per platter, with prospects of reaching 4TB and beyond. The partnership endeavors to double storage capacity within the same spatial constraints while reducing carbon footprint per TB by 55%.

Discover Seagate Technology analyst ratings and price targets on MarketBeat.

Charting the Course: Daily Symmetrical Triangle

The daily candlestick chart for STX reveals a symmetrical triangle formation. The upper descending trendline took shape at $100.44 on March 6, 2024, while the lower ascending trendline materialized at $83.53 on March 19, 2024. These trends intersect at the apex point, awaiting a breakout either above the upper trendline or below the lower trendline before convergence.

With the daily RSI descending below the 60-band, key support levels are identified at $89.02, $83.53, $75.61, and $69.09.

This article, “The Data Storage Device Revival: Riding High on the AI Wave,” was originally published on MarketBeat.

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