Memory chips and storage stocks have been booming lately, fueled by booming memory demand. However, this rally has cooled of late as Google’s introduction of its new AI memory compression “TurboQuant” sent DRAM and NAND stock prices tumbling. Even Seagate (STX), a hard drive maker, retreated as investors worried about memory demand. But JPMorgan tells investors to ignore this noise. The firm just initiated coverage of Seagate with an overweight rating and a $525 price target, arguing that spending on hyperscale data centers and pricing tailwinds should drive strong growth.
In other words, JPMorgan sees the recent pullback as a buying opportunity rather than a warning sign.
Seagate is a leading global provider of data storage solutions. The company designs and manufactures hard drives, solid state drives, and storage systems for data centers, cloud providers, and enterprises around the world. Its high-capacity drives power the backbone of the digital economy, enabling massive AI, cloud and video workloads.
Seagate has been busy launching new products and technology. In January 2026, it began shipping its first 32TB hard drives for the Exos, SkyHawk AI, and IronWolf Pro lines. These massive drives target AI video analytics and hyperscale cloud storage. Senior Vice President Melyssa Banda emphasized that AI-powered video is exploding and “demands a new type of data backbone, massive capacity storage at the edge and in the data center.”
Additionally, the company continues to improve its next-generation HAMR Mozaic units. Management said initial production of HAMR-based Mozaic 4+ will begin in the third quarter, and near-line HDD capacity is already fully committed through 2026. These moves show Seagate is positioning itself to meet the onslaught of AI data and cloud workloads.
That strength has fueled a big rally in stocks. So far in 2026, Seagate shares are up about 42.26%, and over the past year, they are up about 361% as demand for artificial intelligence and data centers accelerates. But after that streak, the valuation has become greatly exaggerated. Seagate now trades at 40.35 times earnings and about 30.47 times EV/EBITDA, well above the industry medians of about 28.79 times and 12.33 times, respectively. That leaves stocks valued for continued strong growth, with less room for disappointment.
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Last week’s headline was Google’s TurboQuant memory compression. The news shook memory and chip stocks, including shares of Micron (MU), Sandisk (SNDK) and others, which plunged on fears that future AI models would need less raw hardware. Seagate shares fell in the same selloff. But many analysts say the reaction is overblown. Lynx Equity’s KC Rajkumar noted that TurboQuant simply “relieves bottlenecks without destroying overall demand” and reaffirmed bullish targets on chip names.
In short, it won’t end the AI-driven data deluge. JPMorgan agrees with that view: It urges investors to ignore the panic and “buy the dip” in Seagate. The bank sees TurboQuant as a short-term problem that won’t derail Seagate’s long-term growth story.
Seagate Technology just demonstrated that the rise of AI is not just about chips. The data storage giant delivered a fiscal second-quarter report that beat expectations. Revenue increased 22% year over year (y-o-y) to $2.83 billion. Non-GAAP earnings per share (EPS) were $3.11, well above the $2.79 analysts were expecting and well above last year’s $2.03. The main driver was red-hot customer demand for AI and cloud. Nearline data center sales increased 28% to $2.2 billion, representing 79% of total revenue. Seagate shipped 190 exabytes of drives during the quarter.
Additionally, profitability improved dramatically. Non-GAAP gross margin expanded to about 42.2%, up 670 basis points year over year thanks to better pricing and product mix. Additionally, net income nearly doubled to $593 million.
Free cash flow amounted to a solid $607 million, highlighting the company’s healthy cash generation. Seagate also declared its regular quarterly dividend of $0.74 per share.
CEO Dave Mosley said the results “exceeded our expectations on both the top and bottom lines” thanks to strong execution and data center demand.
Looking ahead, Seagate expects fiscal third-quarter revenue of about $2.9 billion and non-GAAP earnings per share of about $3.40, both above previous Street estimates. Analysts now model fiscal 2026 EPS of $11.82, representing roughly 62.8% growth.
Wall Street remains very bullish on Seagate stock. The consensus rating is “Strong Buy”, with an average 12-month price target of around $447, about 70% above the current level.
Additionally, in recent weeks several companies have raised their outlooks. JPMorgan initiated coverage on Overweight with $525 PT. Citigroup reiterated a buy and raised its target to $480, noting that enterprise customers are “expanding data center capacity to accommodate growing AI workloads.”
Morgan Stanley maintained an overweight stance with a $372 price target and noted that “cloud storage demand trends remain very strong, with upside options for pricing and margins.”
Additionally, Bank of America raised its target to $400, expecting second-quarter results to beat consensus. In short, most analysts see advantages. Even the average goal assumes profits from here.
As a Putnam note put it, Seagate is well positioned in a data and AI boom, and JPMorgan agrees, so the stock still looks like a buy despite the recent sell-off.
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On the date of publication, Nauman Khan had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
