Western Digital (WDC), along with other players in the memory space, face a ‘likely better than feared DRAM and NAND market’ in 2025, according to Citi Research.
DRAM stands for dynamic random access memory, while NAND is a type of non-volatile flash storage.
“We reiterate our Buys on SK hynix (OTCPK:HXSCF) and Western Digital as we expect the leading global memory makers to benefit from the limited memory supply growth on the back of limited conventional memory supply growth amid pressured capex in recent years, and limited NAND supply growth,” said Citi analysts led by Peter Lee, in a Monday report.
Western Digital was up nearly 3% during early market action Monday. It has declined 21% over the past month, but is up 40% over the past 12 months.
Seeking Alpha analyst Gary Alexander said Western Digital’s recent decline creates a buying opportunity.
“Western Digital itself, however, is experiencing a surge in memory orders and healthy pricing, which is leading to vastly expanded profitability,” he noted.
Citi also sees artificial intelligence driving the need for high-bandwidth memory or, HBM.
“We expect DRAM demand to grow +17% YoY in 2025E, supported by HBM and on device AI demand growth,” Lee noted. “In particular, we expect HBM demand to grow +96% YoY in 2025E. We expect server DRAM demand growth, especially for AI-related applications, to lead to DRAM recovery in 2025E.”
DRAM demand should be supportive for Micron Technology (NASDAQ:MU), SK hynix and Samsung (OTCPK:SSNLF).
“We expect storage, HDD, to be the next bottleneck in AI computing, especially in training,” Lee said. “While companies still heavily rely on HDD for storing data, slow data transfer speed in HDD is emerging as a key bottleneck in AI training. As such, we see enterprises will increasingly shift their data storage from HDD to SSD for AI training purposes.”
SSDs, or solid-state drives, use flash drives rather than hard disk drives, HDDs. SSDs are more durable, power efficient and faster, making them more suitable for AI training.
Citi has a $95 price target on Western Digital.
“Our valuation levels are higher compared to prior medians given we are in the early cycles of a sustained recovery, and we expect estimates to move higher as recovery takes hold, coupled with an anticipated spin-off which has the potential to unlock value for the company,” Lee said.
Western Digital has a Buy rating from Seeking Alpha analysts, Wall Street analysts and Seeking Alpha’s Quant system, which regularly beats the market.
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