Morgan Stanley Predicts IT Hardware Industry to be "Stronger for Longer" Amid Strengthening Demand

Morgan Stanley analysts predict a strong IT hardware industry due to growing demand for data-enabling technologies. Katy L. Huberty, global director of Research, expects a cycle peak to extend into 2028. The firm recommends top hardware stocks, citing a "stronger for longer" outlook for the industry.

Morgan Stanley analysts have recently released a comprehensive report on the IT hardware industry, highlighting a promising outlook for the sector. The report, which focuses on the hard disk drive (HDD) market, predicts a "Stronger For Longer" cycle that is expected to extend into 2028.

The report, authored by Katy L. Huberty, global director of Research, emphasizes the growing demand for data-enabling technologies, particularly in the cloud capital expenditure (Capex) and AI sectors. The global spending by the top 11 cloud providers is projected to reach $459 billion in 2025, representing a 61% year-over-year increase, with continued growth of 16% expected in 2026 Morgan Stanley bullish on hardware: HDD industry entering a 'long-term uptrend' cycle, with the peak extended to 2028; focusing on Western Digital and Seagate Technology.^[1].

The report also highlights the significant role of AI in driving HDD demand. AI inference workloads have become a key growth driver, with global cloud providers' token processing volumes continuously rising. The data volume of a one-minute compressed video is approximately 20,000 times greater than a standard text page, significantly increasing storage requirements. Microsoft's Wisconsin AI data center has storage systems spanning five football fields, underscoring the massive demand for HDD storage driven by AI Morgan Stanley bullish on hardware: HDD industry entering a 'long-term uptrend' cycle, with the peak extended to 2028; focusing on Western Digital and Seagate Technology.^[1].

Morgan Stanley predicts a supply gap of approximately 150EB in the HDD market over the next 12 months, representing 10% of market demand, which will persist until 2028. The core reason for constrained supply lies in the extreme difficulty of expanding HDD production capacity, with construction costs exceeding $500 million per factory Morgan Stanley bullish on hardware: HDD industry entering a 'long-term uptrend' cycle, with the peak extended to 2028; focusing on Western Digital and Seagate Technology.^[1].

The report also notes that Western Digital (WDC.US) and Seagate Technology (STX.US) are expected to benefit significantly from this trend. Morgan Stanley has raised its earnings forecasts and target prices for these companies, maintaining an "Overweight" rating for both, with Western Digital as the top pick. The firm expects Western Digital’s FY26-FY28 revenue to range from $11.286 billion to $15.166 billion, marking a 3%-32% increase from prior forecasts, with EPS ranging from $7.03 to $12.84, up 6%-58% Morgan Stanley bullish on hardware: HDD industry entering a 'long-term uptrend' cycle, with the peak extended to 2028; focusing on Western Digital and Seagate Technology.^[1].

For Seagate Technology, Morgan Stanley forecasts FY26-FY28 revenue to range from $10.462 billion to $13.673 billion, an increase of 3%-17%, with EPS ranging from $10.71 to $20.54, up 4%-26%. The report also notes that Seagate Technology is expected to lead the market with its Heat-Assisted Magnetic Recording (HAMR) technology, with plans to launch 40TB+ HAMR HDDs in the second half of 2026 Morgan Stanley bullish on hardware: HDD industry entering a 'long-term uptrend' cycle, with the peak extended to 2028; focusing on Western Digital and Seagate Technology.^[1].

The report concludes that there is structural revaluation potential in the HDD industry, with the core factor being the "shift in industry attributes from cyclical to structural growth." The current valuation is significantly below a reasonable level, with a fair target multiple of 8x, indicating an 80% upside potential Morgan Stanley bullish on hardware: HDD industry entering a 'long-term uptrend' cycle, with the peak extended to 2028; focusing on Western Digital and Seagate Technology.^[1].

The report also mentions that CoreWeave, an AI cloud computing firm, has signed a new deal with Meta to provide $14.2 billion worth of computing power to the Facebook owner, further underscoring the growing demand for AI infrastructure CoreWeave Strikes $14.2 Billion Deal With Meta To Boost AI Capability^[2].

In summary, Morgan Stanley's report paints a bullish picture for the IT hardware industry, particularly the HDD sector, with a "Stronger For Longer" cycle expected to extend into 2028. The report highlights the significant demand from cloud Capex and AI, along with the supply-side constraints that are driving up HDD prices. The report also recommends Western Digital and Seagate Technology as top picks in the industry.

References

Morgan Stanley bullish on hardware: HDD industry entering a 'long-term uptrend' cycle, with the peak extended to 2028; focusing on Western Digital and Seagate Technology.^[1] https://news.futunn.com/en/post/62802860/morgan-stanley-bullish-on-hardware-hdd-industry-entering-a-long
CoreWeave Strikes $14.2 Billion Deal With Meta To Boost AI Capability^[2] https://www.forbes.com/sites/kirkogunrinde/2025/09/30/coreweave-strikes-142-billion-deal-with-meta-to-boost-ai-capability/