Western Digital (NASDAQ:WDC) Falls 10% in the Memory Rout, but Analysts Just Raised Targets to US$732

Western Digital (NASDAQ:WDC) fell about 10% to around US$539 on Thursday, 2 July, swept up in a broad selloff across memory and storage stocks. What makes the move striking is the timing: it came even though the stock is up around 250% this year and just as BofA lifted its price target to US$732. In our view, this looks far more like profit-taking after a huge run than a sign the story is breaking.

Why the Selloff Missed What’s Driving Western Digital

First, a quick clarification. Western Digital makes the hard drives that store huge amounts of data, not the memory chips that names like Micron produce. Its old flash-memory arm was spun off as SanDisk, which was hit hard in the same selloff. That distinction matters here, because the selloff was triggered by fears that Meta and other big tech firms might be building too much AI capacity, a worry aimed at chips, not at storage.

Western Digital’s own demand, meanwhile, looks strong. Its most recent quarter showed revenue up 45% on a year earlier, with gross margins above 50%, and management says hard-drive production is fully booked for 2026, backed by multi-year cloud deals running through 2028 and beyond.

AI data centres need somewhere to keep vast amounts of data, and that has left storage in short supply. The takeaway is that this was sector-wide nerves, not a problem at Western Digital itself.

A 250% Run Meets Rising Price Targets

Here is the tension for investors. After surging around 250% this year, the stock was due a pullback, and sharp drops are normal after a run that big. Yet the analyst community keeps raising its targets. BofA lifted its to US$732, Cantor Fitzgerald went to US$900, and Melius Research sits highest at US$1,050, all citing tight supply and AI-driven storage demand.

The catch is that the average target of around US$590 is only modestly above today’s price, which suggests much of the easy money may already have been made. On about 32x earnings, the stock is not obviously cheap, but nor is it wildly expensive given how fast profits are growing.

We believe the valuation is demanding but defensible, as long as the storage shortage lasts.

The Investor’s Takeaway for Western Digital

Our take: this reads as a buyable dip within a genuine boom rather than the top, but expect a bumpy ride from here, much like Micron after its own post-earnings crash. The bigger question hangs over the whole sector.

Storage has always been cyclical, with booms followed by busts, so the bull case is that AI demand has broken that pattern, while the bear case is that it has only delayed it.

For growth investors comfortable with volatility, buying weakness in a clear winner makes sense. More cautious investors may prefer to let the dust settle first. The one thing that would change our view is real evidence of softening storage demand, not just sector-wide nerves. Until then, we see the drop as noise, not the end of the story.

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