Core Viewpoint - Morgan Stanley's report indicates that the HDD industry is entering a "Stronger For Longer" cycle, with the peak expected to extend until 2028, currently in the mid-cycle phase [1] Demand Side - HDD demand is driven by cloud capital expenditure and AI, showing explosive growth; global top 11 cloud providers' capital expenditure is projected to reach $459 billion in 2025, a 61% year-on-year increase, with a 16% growth rate in 2026 [1] - From 2024 to 2028, global data center spending is expected to reach $2.9 trillion, with 85% allocated to AI-specific data centers; the revenue correlation between Western Digital and Seagate with cloud capital expenditure is as high as 0.8-0.9, with cloud business accounting for over 75% of their revenues [1] Supply Side - Supply constraints are expected to exacerbate the supply-demand imbalance, pushing HDD prices upward; a projected supply gap of approximately 150EB, or 10% of market demand, is anticipated over the next 12 months, continuing until 2028 [2] - The difficulty in expanding HDD production capacity is a core reason for supply constraints, with new factory setups taking 12 months for equipment procurement and hiring, followed by another 12 months for production ramp-up, with costs exceeding $500 million per factory [2] Pricing and Contracts - Western Digital announced a gradual price increase for all HDD products, with Seagate following suit, expecting price hikes of 7-10%; major cloud providers have signed long-term agreements with HDD manufacturers, providing 18 months of visibility into industry demand [3] Financial Performance and Valuation - Morgan Stanley significantly raised revenue forecasts for Western Digital and Seagate, with Western Digital projected to generate revenues of $11.286 billion to $15.166 billion from FY26 to FY28, an increase of 3%-32% from previous estimates; EPS is expected to rise to $7.03-$12.84, a 6%-58% increase [3] - Seagate's revenue is projected to be $10.462 billion to $13.673 billion for FY26 to FY28, with EPS expected to rise to $10.71-$20.54, an increase of 4%-26% [4] Industry Valuation - The HDD industry is undergoing a structural revaluation, transitioning from a cyclical to a structurally growing asset class; current valuations are significantly below reasonable levels, with projected EPS compound growth rates exceeding 35% for both companies over the next three years [4][5] - Current PE ratios for Western Digital and Seagate are 14x and 18.3x, respectively, placing them in the bottom 25% of the industry, while the implied reasonable target multiple is 8x, indicating an 80% upside potential [4]