We recently compiled a list of the 7 Best Computer Hardware Stocks to Buy. In this article, we are going to take a look at Seagate Technology Holdings plc (NASDAQ:STX) against the other computer hardware stocks.
According to a report by Research and Markets, the computer hardware market is projected to grow from $674.44 billion in 2023 to $710.32 billion in 2024, with a 5.3% compound annual growth rate (CAGR), mainly driven by personal computing, global supply chains, internet expansion, and more data centers.
By 2028, the market is expected to reach $914.55 billion at a 6.5% CAGR, fueled by trends like remote work infrastructure, sustainable practices, smart city development, and digital transformation. Key trends include edge computing, AI integration, modular systems, biometric security, and hybrid cloud environments, with significant investments in smart city projects, particularly in China.
The most important trends in the advancement of computer hardware are AI and machine learning which are revolutionizing hardware design and enabling applications like autonomous vehicles and robotics. Apart from that, the Internet of Things (IoT) is expanding, connecting more devices in smart homes, cities, and industries. It has led to a focus on improving security, efficiency, and the ability of different IoT devices, systems, and technologies to work together seamlessly.
Role of AI in the Growth of the Computer Hardware Industry
On May 28, Michael Fertik, founder of Heroic Ventures, joined CNBC’s ‘Squawk Box’ and said that we’re still in a phase of AI development where hardware is crucial. Companies like NVIDIA are thriving because their products are essential for running large AI models, which require immense computational power. He said that this situation is similar to how search engines, like Google or Bing, have long relied on substantial investments in hardware to function effectively.
Fertik added that as AI technology evolves, there will be a shift. The costs associated with AI hardware will decrease, and smaller, more specialized AI models will emerge, which will be tailored for specific industries or purposes.
When this happens, the focus and financial gains will also move toward software and computer science (software testing and development) companies. However, they will not significantly move from computer hardware companies and they will still benefit from the growing AI industry.
Industry Has Room for Growth Beyond AI
A major growth prospect for computer hardware is quantum computing, an industry that is expected to reach $11.4 billion by 2027 from $2.74 billion in 2022, according to Research and Markets. Quantum Computing offers significant benefits by improving the speed and efficiency of complex computations.
Unlike classical computers, which process bits as 0s or 1s, quantum computers use qubits that can represent multiple states at once, which enables them to solve problems much faster. This is especially valuable in fields like cryptography, drug discovery, financial modeling, and optimization as it solves complex simulations and calculations that are currently infeasible for classical computers.
Quantum Computing can significantly benefit the computer hardware industry by driving advancements in technology and creating new markets. Similar to AI, the development of quantum hardware requires innovations in materials science, cooling systems, and chip design, which can push the boundaries of traditional hardware engineering.
As quantum computers become more practical, they will require specialized hardware components, which will create new opportunities for companies to develop and supply these advanced technologies. For more details, you can read our article about the 12 Best Quantum Computing Stocks To Invest In.
Our Methodology
For this article, we used stock screeners and other financial media websites to identify 12 computer hardware companies with market capitalizations of above $1 billion. The analyst comments and ratings were mostly taken from The Fly and TipRanks.
A technician configuring a network-attached storage drive.
Seagate Technology Holdings plc (NASDAQ:STX)
Stock Price as of August 9: $96.28
Average Analyst Price Target Upside as of August 9: 29.83%
Seagate Technology Holdings plc (NASDAQ:STX) is an American data storage company known for its significant contributions to the data storage industry. The company was founded in 1978 as Shugart Technology. It has a rich history of innovation, especially in the development of hard disk drives (HDDs). Seagate’s (NASDAQ:STX) first product, the 5.25-inch ST-506 HDD with a 5-megabyte capacity, revolutionized the industry and set the stage for the company’s dominance in the market.
Over the years, Seagate (NASDAQ:STX) expanded its market presence through strategic acquisitions, including Control Data Corporation’s Imprimis division in 1989, Conner Peripherals in 1996, Maxtor in 2006, and Samsung’s HDD business in 2011. These acquisitions strengthened the company’s position as a leader in the HDD market.
Seagate’s (NASDAQ:STX) product portfolio includes a wide range of HDDs and solid-state drives (SSDs) designed for various applications. The company offers products under different brand names such as Barracuda, Firecuda, Ironwolf, Skyhawk, and Exos, catering to general usage, gaming, network-attached storage (NAS), surveillance, and enterprise data centers.
The company has also been at the forefront of technological advancements as it introduced some industry-firsts like the 7,200 RPM Barracuda HDD, the 10,000 RPM Cheetah HDD, and the first 3 TB HDD. Its commitment to innovation also applies to its recent developments, which include the demonstration of the industry’s first HDD with a non-volatile memory express (NVMe) interface and its entrance into the object storage business with the introduction of CORTX.
On July 24, Morgan Stanley analyst Erik Woodring increased the target price for Seagate’s (NASDAQ:STX) stock from $115 to $133 and maintained an Overweight rating. Woodring’s updated price target suggests that the company’s stock could rise significantly. According to the firm’s new forecast, the stock could see an increase of 33% in the fiscal year 2025 and 40% in the fiscal year 2026 compared to what analysts currently expect.
The analyst pointed out that the stock is likely to benefit from strong supply and demand dynamics in the HDD market. As demand for HDDs continues to grow and supply remains strong, it will likely drive up prices and improve The company’s profit margins. This optimistic outlook is why Woodring believes there is further potential for the stock to increase in value.
Mizuho Securities analyst Vijay Rakesh also keeps a bullish stance on Seagate’s (NASDAQ:STX) stock as he maintained a Buy rating on the company with a $125 price target on July 25. He expects the company to boost profitability through better pricing and cost cuts. Rakesh noted its strong demand outlook and significant data shipments, credited to new products and advancements in Heat-Assisted Magnetic Recording (HAMR) technology. He expects continued recovery and growth.
As of August 9, Seagate (NASDAQ:STX) has been covered by 24 analysts and their average price target of $125 represents a nearly 30% upside to the company’s stock price at current levels. This brings the company to our list of best computer hardware stocks to buy.
Overall STX ranks 5th on our list of the best computer hardware stocks. While we acknowledge the potential of STX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than STX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.