According to Citi Research, Western Digital (WDC) and other memory players are facing a “likely better than feared DRAM and NAND market” in 2025.
DRAM stands for Dynamic Random Access Memory, while NAND is a type of non-volatile memory. Flash memory.
“We reiterate our buy ratings on SK hynix (OTCPK:HXSCF) and Western Digital as we expect the world’s leading memory makers to benefit from limited memory supply growth due to limited growth in conventional memory supply due to pressured capital spending in recent years and limited growth in NAND supply,” Citi analysts led by Peter Lee said in a report Monday.
Western Digital was by almost 3% during early market activity on Monday. It has Decrease of 21% last month, but is up to 40% in the last 12 months.
Seeking Alpha analyst Gary Alexander said Western Digital’s recent decline creates a buying opportunity.
“However, Western Digital itself is experiencing an increase in storage orders and healthy pricing, resulting in significantly increased profitability,” he noted.
Citi also believes that artificial intelligence will increase the need for high-bandwidth memory (HBM).
“We expect DRAM demand to grow +17% YoY in 2025, supported by growth in HBM and on-device AI demand,” noted Lee. “In particular, we expect HBM demand to grow +96% YoY in 2025. We expect growth in server DRAM demand, especially for AI-related applications, to lead to a recovery in DRAM demand in 2025.”
DRAM demand is likely to support Micron Technology (NASDAQ: MU), SK hynix and Samsung (OTCPK:SSNLF).
“We expect storage, i.e. the hard disk, to be the next bottleneck in AI data processing, especially training,” said Lee. “While enterprises still rely heavily on hard disks for data storage, the slow data transfer speed of hard disks is becoming a critical bottleneck in AI training. Therefore, we expect enterprises to increasingly switch their data storage from hard disks to SSDs for AI training purposes.”
SSDs, or solid-state drives, use flash drives instead of hard disk drives (HDDs). SSDs are more durable, energy efficient, and faster, making them better suited for AI training.
Citi has a price target of USD 95 for Western Digital.
“Our valuation levels are higher relative to past averages as we are in the early cycles of a sustainable recovery. We expect estimates to continue to rise as the recovery matures, coupled with a planned spin-off that has the potential to increase the value of the company,” Lee said.
Western Digital has received a Buy rating from analysts at Seeking Alpha, Wall Street analysts, and Seeking Alpha’s quant system, which regularly beats the market.
