Zacks Computer-Storage Devices Industry: Robust Growth Ahead Amid Digital Transformation and Cybersecurity Needs

The Zacks Computer-Storage Devices industry is poised for robust growth, driven by accelerating digital transformation, edge computing, AI workloads, and enterprise cloud adoption. The democratization of higher internal memory smartphones, faster Internet speed, and 5G will likely act as a tailwind for industry participants. As cyberattacks continue to increase in frequency, the demand for end-to-end encryption will also drive growth in secure storage solutions. These factors propel the demand for sophisticated data storage solutions, bolstering computer storage product requirements.

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Industry Description

The Zacks Computer-Storage Devices industry comprises companies that design, develop, manufacture, and market various hard disk drives (HDDs) and solid-state drives (SSDs. These drives are utilized in PCs, laptops, mobiles, servers, network-attached storage devices, video game consoles, digital video recorders, and other consumer electronic devices. Some industry participants provide software-defined all-flash solutions that are uniquely fast and cloud-capable for customers. Many industry players offer high-performance modular memory subsystems, mount and blade server systems, enterprise storage and data management software, and hardware products and services.

4 Trends Shaping the Computer-Storage Industry's Future

1. AI’s Impact on Storage Devices Industry: Rapid proliferation of AI is overhauling the entire tech landscape. AI workloads like training large language models and running inference are driving demand for high-speed, high-capacity, and low-latency storage solutions. Traditional storage architectures are insufficient for the data throughput required by AI applications, prompting a transition toward NVMe-based SSDs (PCIe Gen 4/5/6), software-defined storage, and storage class memory. Object storage is best suited for storing unstructured data, a common prerequisite for AI workloads. Other fast-emerging solutions include Parallel File Systems Optimized for AI and QLC NAND SSDs for AI Data Lakes.
2. Innovation in Cloud Storage Technologies to Drive Adoption: Broader storage options from collocated hardware (such as hard disks and tape drives) to many cloud storage solutions have put the industry on a growth trajectory. Industry players are well-poised for growth owing to a rapid increase in data, the complexity of data formats, and the need to scale resources at regular intervals. These companies rely on AI for IT Operations (AIOps) and machine learning to manage and optimize storage solutions. To streamline data storage, companies are relying on virtualization technologies. As more data is added from IoT, companies are turning to edge computing architecture to reduce latency and boost flexibility. Kubernetes storage is becoming increasingly popular as it facilitates greater agility and scalability. This has bolstered the deployment of high-capacity mass storage products, which is a positive for industry players.
3. Increases in IT Spending Bode Well, but Macro Conditions Remain Concerns: Escalating trade tensions and tariffs are emerging as a key concern. These are weighing heavily on global macroeconomic conditions and can disrupt supply chain dynamics. Uncertainty in the macro backdrop and inflationary pressure could affect spending across small and medium-sized businesses globally. The uncertainty in business visibility could dent the industry’s performance in the near term. However, optimism surrounding higher IT spending bodes well. Per a report from Gartner, worldwide IT spending is now projected to reach $5.61 trillion in 2025, indicating an increase of 9.8% from 2024 levels. The Devices segment is expected to grow 10.4% in 2025, mainly due to generative AI hardware upgrades, according to the report.
4. Uncertainty Around PC Shipments: Worldwide PC shipments were up 4.9% year over year in the first quarter of 2025, per an IDC report. The research firm noted that the demand has witnessed a “pull-in” in the first quarter owing to expectations of tariffs. However, IDC highlighted that the new tariffs could have a direct inflationary impact on the PC market. This could delay IT spending across the industry. The global recession also remains concerning despite the presence of tailwinds like demand for on-device AI PCs and installed base upgrades ahead of Windows 10 end of support, added the firm.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Computer Storage is housed within the broader Zacks Computer and Technology Sector. It carries a Zacks Industry Rank #41, which places it in the top 17% of more than 244 Zacks industries. The group’s Zacks Industry Rank indicates bright near-term prospects as the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

Industry Underperforms S&P 500 and the Sector

The Zacks Computer-Storage Devices industry has underperformed the S&P 500 composite and the broader sector in the past year. The industry has plummeted 32.4% in this period compared with the S&P 500’s gain of 9.7%. The broader sector has gained 7.6% in the same time frame.

Industry's Current Valuation

On the basis of forward 12-month P/E (or Price/Earnings), which is a commonly used multiple for valuing computer storage devices companies, we see that the industry is currently trading at 19.46X compared with the S&P 500’s 21.89X. This is below the sector’s forward 12-month P/E of 26.2X. In the past five years, the industry has traded as high as 194.54X and as low as 10.3X, with the median being 17.55X.

3 Computer-Storage Devices to Add to Watchlist

1. Western Digital: Headquartered in San Jose, CA, WDC is a leading developer and manufacturer of data storage devices and solutions based on NAND flash and hard disk drive technologies. Western Digital is gaining strength across its Cloud end-market amid ongoing geopolitical and macro turmoil. Despite broader economic uncertainty, demand from its hyperscale customers remains strong amid supply constraints. To address these challenges, management is forming teams to reduce disruptions and planning long-term supply chain changes to stay flexible and strong. Rising AI uptake is likely to boost storage demand for both HDD and Flash, creating opportunities. It is working closely with two hyperscale customers on HAMR technology and has secured long-term deals through mid-2026. Strong data center demand is likely to drive sales in the fiscal fourth quarter. However, it expects slight sequential operating expense growth to $330-$340 million, driven by variable pay, key hires, and higher R&D investment stemming from the SanDisk separation. Currently, WDC sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for fiscal 2025 earnings has remained unchanged at $4.73 per share in the past seven days. The stock has plummeted 21.5% in the past year.
2. Teradata: TDC is a leading provider of connected multi-cloud data platforms. It has evolved from an enterprise database company to an enterprise analytics platform provider. TDC’s AI and hybrid cloud innovations bode well. The recently launched Enterprise Vector Store, integrated with NVIDIA’s NeMo Retriever, supports agentic AI and retrieval-augmented generation applications. TDC’s advanced AI solutions, particularly in Customer Experience AI, are in high demand as businesses prioritize data-driven insights. Moreover, Teradata has established partnerships with the top three global public cloud service providers: AWS, Microsoft Azure, and Google Cloud. These partnerships are helping Teradata to provide companies around the globe access to its VantageCloud. In May 2025, Teradata partnered with Fivetran to automate data pipelines from more than 700 sources into VantageCloud. This will aid in reducing data migration costs, streamline operations, and boost business insights. Currently, TDC carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2025 earnings has remained at $2.16 per share in the past seven days. The stock has declined 37.4% in the past year. 3.NetApp: Headquartered in San Jose, CA, NetApp is a leading provider of enterprise storage, data management software, and hardware products and services. NetApp is witnessing higher demand from customers for its portfolio of modern all-flash arrays, especially the C-series capacity flash and ASA block-optimized flash. The new all-flash A-series is also picking up momentum. These enterprise storage products will allow users to boost workloads including traditional enterprise applications and Gen AI