US Stock Market Move | Morgan Stanley and other investment banks rebut Toshiba's expansion panic. Western Digital Corporation (WDC.US) and Seagate (STX.US) rebound sharply.

On Monday, Western Digital Corporation (WDC.US) rose more than 7% in early trading, while Seagate Technology Holdings PLC (STX.US) gained over 5%. In the previous trading session, news of Toshiba's hard drive capacity expansion triggered a sector-wide pullback, with both stocks falling more than 10%. Subsequently, Morgan Stanley and Bernstein successively released research reports rebutting the market panic. Both institutions believe the market overreacted to Toshiba's expansion news, and that the actual impact on industry supply is limited; AI agent tasks and physical AI are driving incremental storage demand, and the tight HDD supply-demand dynamic continues. Both maintained bullish ratings on Seagate and Western Digital Corporation, with Morgan Stanley naming Seagate its top pick. Morgan Stanley, after conducting supply chain visits and research, stated that the capacity expansion at Toshiba's Philippines factory is a project that has been planned for two years, with an annual capacity growth rate of approximately 30%, merely in line with the industry's overall supply growth rate and insufficient to catch up with rapidly expanding market demand. Constrained by core component bottlenecks from TDK and Resonac, as well as lagging technology roadmaps, the timeline for the expansion to materialize is aggressive and difficult to achieve. The 30% market share mentioned in the Nikkei report is an outdated target that is very difficult to reach under realistic conditions; a reasonable expectation is that Toshiba's market share could only rise to 12-13%. Meanwhile, Morgan Stanley confirmed that Seagate and Western Digital Corporation currently have no new expansion plans, and industry pricing strategies have not changed. On the demand side, Morgan Stanley noted that HDD demand has accelerated over the past 1-2 months. Beyond traditional public cloud providers, emerging cloud vendors and humanoid physical AI companies have become new purchasing forces; AI agent workloads generate large volumes of context data that require persistent storage, further driving hard drive consumption. Spot market prices are strengthening, with non-long-term agreement spot quotes reaching 3-5 cents/GB, significantly higher than contract prices, validating the industry's upward pricing logic. The industry supply gap is approximately 300EB in 2026 and will widen to 400EB in 2027-2028. On valuation, Seagate trades at 10x PE on 2028 base-case EPS and only 6.8x on the optimistic scenario; Western Digital Corporation trades at 8.5x PE on 2028 base-case EPS and 5.8x on the optimistic scenario, offering attractive valuations. Bernstein likewise considers Toshiba's expansion a "tempest in a teapot." Even under the optimistic assumption that Toshiba nearly doubles its capacity, combined with Seagate and Western Digital maintaining 25% annual capacity growth, Toshiba's market share could only rise from 11.2% to 16.8%, far short of 30%. From a capital expenditure perspective, the $380 million investment mentioned in the report is insufficient to support a large-scale doubling of capacity; Toshiba's areal density technology significantly lags behind peers, and its high-capacity product iterations are delayed. Expansion would be forced to add more physical platters, creating greater capital pressure and prominent execution risks. Bernstein reiterated "Outperform" ratings on both companies, with a price target of $1,350 for Seagate and $770 for Western Digital Corporation, recommending investors use this stock price pullback as a buying opportunity.