Seagate Tests Breakout After Top Pick Designation By Morgan Stanley, Called 'Underappreciated' AI Stock

Seagate Technology (STX) stock jumped Monday morning, breaking out above a consolidation pattern entry. The hard-disk drive maker was named top pick by Morgan Stanley.

Seagate stock has rocketed 67% higher this year and is ahead 595% compared with 12 months ago. Demand for low-cost storage options in data centers has sent shares of both Seagate and its rival Western Digital (WDC) soaring. But Morgan Stanley analysts led by Erik Woodring said Monday that the hard-disk drive makers may still be the “most underappreciated and overlooked” data center stocks.

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“Simply put, HDD’s (hard-disk drives) are perhaps the investments most-levered to data center spending among the ‘AI picks and shovels,’ remain a critical component bottleneck for cloud services providers (and) have an attractive industry structure,” Woodring wrote to clients.

Woodring reiterated an overweight call for both Seagate and Western Digital stock with the note. Citing strong check-ins with industry sources, he upped his price target for Seagate to 582 from 468. He raised his Western Digital price target to 380 from 369.

Hard-disk drives have traditionally followed boom-and-bust cycles but Woodring said that data demands from AI are supporting his view that the market will be “stronger for longer.”

Meanwhile, Morgan Stanley flipped its top pick designation to Seagate, away from Western Digital. Seagate is trading at a slightly discounted price-to-earnings multiple compared with Western Digital, Woodring told clients.

Further, Woodring believes that Seagate’s shift to offering more drives with HAMR (heat-assisted magnetic recording) technology will help boost its margins. Seagate began rolling out HAMR drives last year, while Western Digital is targeting the first half of next year to begin offering HAMR drives.

Seagate Stock Up 65% In 2026

On the stock market today, Seagate stock gained more than 6% to 458.25 in late morning trades. Western Digital stock is ahead more than 4% at 309.

Seagate stock fell 4% in March but has added 17% already in April, including Monday’s rally.

Shares cleared a consolidation pattern entry of 459.84 in earlier trading, according to IBD MarketSurge.

Further, Seagate stock is flashing “Blue Dot” on its Relative Strength line, according to its MarketSurge chart. Relative Strength measures a stock performance compared with the rest of the market. The bullish RS Line Blue Dot identifies stocks whose relative strength lines are hitting new highs, while the stock is building a new base or breaking out past a buy point.

Seagate Western Digital stock has an IBD Composite Rating of 94 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. Western Digital stock has an IBD Composite Rating of 99.

Western Digital’s score places it third in the overall Computer-Data Storage group tracked by IBD. Seagate is fifth. Memory chipmaker Micron (MU) leads the group, followed by Sandisk (SNDK). It has been a strong run overall for the sector. The Computer-Data Storage group ranks second out of 197 industry groups tracked by IBD, based on six-month price performance.

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