Why Seagate Stock Crushed It With a 17% Gain This Week

Key Points

• Storage stocks are having a moment in the sun with investors just now.

• Much of this has to do with artificial intelligence (AI), which has higher resource requirements than preceding technologies.

• 10 stocks we like better than Seagate Technology Plc ›

We can confidently say that few investors consider the digital storage market to be overly dynamic. Yet several companies in the sector sure have leaped in price recently. Industry veteran Seagate Technology (NASDAQ: STX) was one of those; according to data compiled by S&P Global Market Intelligence, its shares zoomed 16% higher over the course of the trading week.

Part of the AI revolution

One element in the unstoppable rise in demand for artificial intelligence (AI) functionalities is the recent prominence of inferencing -- the use of AI to solve real-world problems. This requires significant storage resources, such as the solutions Seagate is currently selling and developing.

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Image source: Getty Images.

During the week, at least partially on this basis, two analysts raised their price targets on the company's stock. One of them was Morgan Stanley's Erik Woodring, who according to reports wrote in an analyst note that the hard disk drive (HDD) segment that has been Seagate's bread and butter for years is currently in a high-demand/low-supply cycle.

This compelled Woodring to substantially lift his fair-value assessment on the stock, to $265 per share from $168. He maintained his overweight (buy, in other words) recommendation as he did so.

Chosen ones

In an environment where most (or even all) of a particular sector's stocks are seeing a rise on tailwinds benefiting their industry, it's smart for investors to bet on companies that have done the job for years. Seagate is one of those companies, so it isn't surprising it's a key beneficiary of the bull run.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.