Following the announcement of Alphabet's TurboQuant algorithm on March 24, memory and storage stocks have faced broad selling pressure. However, analysts at Bernstein, a subsidiary of Société Générale, believe the algorithm's introduction has no impact on hard disk drive (HDD) demand and only minimal effect on NAND flash memory. The across-the-board sell-off over the past week has instead created more attractive entry points for several stocks, including Seagate Technology PLC, SanDisk, and Western Digital.

Based on this view, Bernstein upgraded Western Digital's rating from "Market-Perform" to "Outperform," significantly raising its price target from $170 to $340. The firm also reaffirmed its "Outperform" rating on Seagate Technology PLC, increasing the price target from $500 to $620, while maintaining an "Outperform" rating and a $1,000 price target for SanDisk.

TurboQuant technology is reported to reduce KV cache memory usage by six times and achieve up to an eight-fold improvement in inference performance on NVIDIA's H100 GPU without losing accuracy. The technology is not used in AI model training.

In an investor report released on Tuesday, a Bernstein analyst team led by Mark Newman stated, "The technology does not compress model weights, training data, or any static data. Therefore, its potential impact is primarily on GPU HBM or system DRAM, with only an indirect effect on NAND flash memory, which is mainly used for offloading cold cache data. Demand impact on HDDs is effectively zero."

Recently, shares of Western Digital, Seagate Technology PLC, and SanDisk have fallen 21%, 17%, and 26%, respectively, from recent highs, with much of the decline occurring after the TurboQuant announcement.

Newman further noted, "AI workloads, rich media content creation, extended data retention periods, and increasingly stringent data sovereignty standards are collectively driving demand growth and higher average selling prices (ASPs). The recovery in NAND flash prices also provides additional support for HDD ASPs. We now project that the combined revenue of Western Digital and Seagate Technology PLC will achieve a compound annual growth rate (CAGR) of 24% between fiscal 2025 and 2030, driven by 24% bit shipment growth and stable ASPs. This represents a significant improvement over our previous model, which assumed 18.7% bit shipment growth and a 3.6% decline in ASPs."