Evercore ISI's Bull Case for Data Storage Stocks: AI Infrastructure Demand Fuels Sector Momentum

The data storage sector’s remarkable performance on January 6, 2026, represents a confluence of several powerful macroeconomic and technological forces that have been building throughout 2025. Evercore ISI analyst Amit Daryanani’s appearance on CNBC’s “Fast Money” program provided institutional validation of what retail and institutional investors have been recognizing: the AI infrastructure buildout represents a structural, rather than cyclical, demand shock for data storage providers [1].

The market data reveals extraordinary short-term momentum, with Seagate Technology (STX) closing at $330.42 after reaching an intraday high of $332.00—a new all-time high for the stock. The trading volume of 5.55 million shares substantially exceeded the 4.28 million average, indicating strong institutional participation in the rally [4]. Western Digital (WDC) demonstrated similar strength, closing at $219.38 after touching $221.23, with volume spiking to 17.13 million shares compared to its 8.66 million average [4]. However, the most striking performance came from SanDisk (SNDK), which surged 27.6% to $334.75, building on its extraordinary 830% gain over the trailing 12 months that transformed the stock from approximately $36 to its current level [5].

The technical and fundamental backdrop supports Daryanani’s constructive view. Seagate’s proprietary Heat-Assisted Magnetic Recording (HAMR) technology, deployed through its Mozaic hard drives, represents a meaningful technological moat that enables higher storage densities while supporting margin expansion [8]. Western Digital’s strategic decision to separate its HDD business and focus on flash storage for large cloud providers has positioned it favorably for the AI era, where low-latency access to large datasets becomes critical for training and inference workloads [7].

The demand-side dynamics are equally compelling. Hyperscalers including Meta, Google, Amazon, and Microsoft have aggressively expanded AI infrastructure throughout 2025, with storage representing a critical component often underestimated in AI spending forecasts [6]. NVIDIA CEO Jensen Huang’s characterization of memory storage as an “unserved market” at CES 2026 has brought additional attention to the sector, with investors re-evaluating the role of storage in the AI value chain [3].

Evercore ISI’s analysis suggests that 2025 rewarded revenue growth with less regard to profitability, but 2026 will see investors focusing on “AI usefulness”—evaluating which companies can monetize AI effectively rather than just spending on it [2]. Data storage companies are uniquely positioned in this framework, as they represent essential infrastructure whose demand is structurally higher regardless of which AI applications ultimately prove successful. Unlike many AI-adjacent businesses, storage providers benefit from increased data generation and retention regardless of which specific use cases dominate.

Companies with differentiated technology, particularly Seagate’s HAMR platform, are positioned to achieve structurally higher incremental margins. Evercore ISI’s analysis suggests best-positioned players could achieve approximately 30% incremental margins, representing a meaningful improvement from historical levels driven by both pricing power and technology cost advantages [2]. The severe shortages of high-capacity drives reported by storage providers create favorable pricing dynamics, allowing companies to dictate terms in an environment where supply cannot keep pace with demand [7].

The data storage rally has broader technology sector implications that investors should monitor. Arista Networks (ANET), another Evercore ISI top pick, is positioned to benefit from AI infrastructure buildout with expected 2026 revenue acceleration [2]. Memory manufacturers including Micron (MU) are experiencing correlated demand, while server and storage hardware providers like Dell (DELL) and Super Micro Computer (SMCI) have direct exposure to the AI infrastructure buildout. These interconnected exposures suggest the storage rally may be leading a broader infrastructure upgrade cycle.

The memory industry has historically experienced significant boom-bust cycles, and current NAND flash shortages may lead to supply gluts as new capacity comes online [5]. While AI demand is genuine, the historical pattern of memory markets suggests that periods of acute shortage typically precipitate periods of oversupply as manufacturers respond to pricing signals. The current supply-demand imbalance has created favorable conditions for storage providers, but investors should carefully monitor capacity announcements and pricing trends as leading indicators of margin compression risk.

Valuation concerns warrant serious consideration, particularly for SanDisk. The stock trades at approximately 22x forward earnings, significantly above memory sector peers like Micron (sub-10x forward P/E) [5]. The consensus mean target for SNDK suggests potential 20% downside from current levels, while options markets indicate significant put positioning with contracts implying potential decline to approximately $185 by mid-2026 [5]. These pricing dynamics suggest that while the fundamental story may be compelling, current valuations may not fully account for execution risk or potential demand variability.

The sector’s momentum depends heavily on continued hyperscaler AI investment, creating concentration risk for investors. Any slowdown in enterprise AI deployment or reallocation of capital away from infrastructure toward application-layer spending could materially impact demand. Given that a relatively small number of large customers (the major cloud providers) drive a disproportionate share of storage revenue, individual procurement decisions could have outsized impact on company results.

The structural shift toward AI infrastructure creates durable demand tailwinds that extend well beyond short-term trading dynamics. For investors with appropriate time horizons and risk tolerance, the current environment offers exposure to essential infrastructure supporting one of the most significant technological transitions in history. The key differentiator between potential winners and losers will be technology positioning—companies with proprietary technologies like HAMR that enable differentiated performance characteristics are better positioned to sustain margins as the market matures.

This analysis is based on the CNBC “Fast Money” appearance [1] featuring Evercore ISI analyst Amit Daryanani on January 6, 2026, supplemented by market data and corroborating analyst reports [2][3][4][5][6][7][8].

• Seagate (STX): +13.59%, closed at $330.42, new all-time high of $332.00
• Western Digital (WDC): +15.69%, closed at $219.38, new all-time high of $221.23
• SanDisk (SNDK): +27.6%, closed at $334.75

SanDisk has delivered approximately 830% returns over the trailing 12 months, transforming from $36 to current levels [5].

Metric	Seagate (STX)	Western Digital (WDC)
Market Cap	$70.21B	$76.18B
P/E Ratio	42.36	30.90
EPS (TTM)	$7.80	$7.10
52-Week Range	$63.19 - $332.00	$28.83 - $221.23

AI infrastructure demand from hyperscalers, HAMR technology deployment, supply shortages creating pricing power, and NVIDIA’s characterization of memory storage as an “unserved market.”

NAND pricing trends, hyperscaler capital expenditure announcements, HAMR adoption rates, and enterprise IT spending data will provide insight into demand sustainability.