Navigating the Slowdown: How ARRY and STX Are Harnessing Tailwinds to Thrive

As global growth slows and macroeconomic uncertainties loom, investors are seeking companies with robust defensiveness and exposure to secular trends. Array Technologies (ARRY) and Seagate Technology (STX) stand out as exemplars of this strategy, leveraging renewable energy demand and data storage growth—two sectors buoyed by structural tailwinds. Both firms boast strong financial metrics, margin expansion potential, and undervalued stock prices, making them compelling long-term plays in a challenging environment.

ARRY: Solar Innovation and Margin Resilience

Array Technologies, a leader in utility-scale solar tracking systems, is benefiting from the global energy transition. Goldman Sachs highlights its 97% year-over-year revenue growth to $302.4 million in Q1 2025, far exceeding forecasts, as demand for renewable infrastructure surges. The company's DuraTrack and OmniTrack systems, which optimize solar panel efficiency, are critical to lowering the cost of solar energy.

A key differentiator for ARRY is its ability to pass rising steel prices to customers, maintaining margins while scaling production. Analyst Brian Lee of Goldman Sachs notes that new products like the Hail XP system (enhancing durability in extreme weather) and 100% domestic content orders (qualifying for U.S. tax incentives) are further boosting profitability. With $2 billion in executed contracts and a Buy rating from Goldman Sachs ($11 price target, implying 67% upside from $6.58), ARRY is positioned to capitalize on the $720B global grid investment required through 2030.

STX: Data Storage's Silent Giant in the AI Era

Seagate Technology, a dominant player in hard disk drives (HDDs), is riding the explosive growth of data storage driven by AI and cloud computing. Morgan Stanley emphasizes that HDDs remain irreplaceable for mass data storage, with Seagate's HAMR (Heat-Assisted Magnetic Recording) technology enabling 36TB drives at far lower cost per terabyte than SSDs. Its Mozaic platform, designed for hyperscale data centers, is a direct beneficiary of AI's insatiable appetite for training data.

STX's financials are equally compelling: Q2 2025 HDD revenue surged 57% year-over-year, and the company aims for low-to-mid-teens revenue CAGR through 2028. With 40% non-GAAP gross margins and a $5 billion share buyback authorization, Seagate is returning capital to investors while scaling its innovation. Morgan Stanley's Overweight rating and $140 price target (25% upside from recent prices) reflect its belief that STX is undervalued relative to its $116.79 consensus target.

Defensive Strengths and Macroeconomic Resilience

Both companies offer defensive attributes critical in a slowdown:
1. Inelastic Demand: Renewable energy and data storage are foundational to modern economies, insulated from cyclical downturns.
2. Margin Expansion: ARRY's cost-pass-through and STX's HAMR-driven efficiencies are creating operating leverage.
3. Geopolitical Tailwinds: U.S. tax incentives (for ARRY) and global data sovereignty laws (for STX) are accelerating adoption of their technologies.

Risks and Considerations

• Supply Chain Bottlenecks: Grid infrastructure delays (for ARRY) or component shortages (for STX) could slow execution.
• Technological Disruption: SSDs threaten HDDs, but STX's focus on high-capacity, cost-effective storage retains its niche.
• Interest Rate Sensitivity: Both stocks may face near-term volatility if rates rise, but their long-term fundamentals remain intact.

Investment Thesis

ARRY and STX are contrarian picks in a slowing economy:
- ARRY's valuation at ~10x forward earnings and STX's 7.5x peak EPS multiples suggest significant upside.
- Their low correlation to broader market volatility (due to sector-specific demand) reduces portfolio risk.
- Diversification benefits: ARRY plays into the energy transition, while STX taps into the AI revolution—two megatrends with decades of runway.

Bottom Line: Investors should consider initiating positions in ARRY and STX now. Both are undervalued leaders in critical growth sectors, with balance sheets and margins that can weather near-term headwinds while capitalizing on long-term trends.

In a world of slowing growth, these stocks offer a rare combination of defensive stability and secular momentum—a winning formula for patient investors.