Is Seagate Technology Holdings plc (NASDAQ:STX) The Best Hardware Stock To Buy According To Goldman Sachs?

We recently compiled the list of the 15 Best Hardware Stocks According To Goldman Sachs using the latest sentiment data. In this article, we are going to take a look at where Seagate Technology Holdings plc (NASDAQ:STX) stands against the other hardware stocks.

The soaring popularity of artificial intelligence for consumer and business applications has injected fresh life into the computing industry. If we're to rewind the hands of time and go back to 2022, the stock market environment was considerably different from what it is now. All major technology stocks, including those that are responsible for making chips that power AI workloads were down by double digit percentages in the wake of breakneck inflation and rising interest rates.

Fast forward to 2024 and the rise in valuations seems to have no end in sight. One bank that's quite optimistic about artificial intelligence is Goldman. Goldman's analyst teams are among the best in the world, and they spend countless hours analyzing stocks and industries for the right set of picks that could disrupt the industry.

On this front, Goldman came out with a note recently that outlined a new beginning for the computer hardware industry. According to the bank, the introduction of AI has necessitated a global shift to new hardware that can support the technology. In its note, the bank's analysts shared:

During the pandemic, the tech hardware industry peaked as the majority of work-from-home employees purchased equipment. The space currently has fully unwind this cycle and we notice stocks like HPQ trading at 9x their 2025 earnings estimates.

Most PCs purchased during the pandemic are expected to be replaced soon. We expect discernable new features of AI, enhanced security, and stronger computational power in upcoming PC and mobile device models, incentivizing the US consumer to spend more on newer equipment than historically, creating an unusually stronger cycle.

Goldman also created a basket of stocks where the highest weighted stock has an 8% weight and there are 20 stocks in the basket. According to Goldman analyst Faris Mourad:

The basket is composed of technology hardware stocks that may benefit from PC and mobile device renovations that could include AI features. The basket can trade up to $250m in one day with no name exceeding 10% of ADV.

Considering this optimism, we decided to take a look at the top Goldman's top 15 hardware stock picks.

Our Methodology

To make our list of the top Goldman Sachs hardware stocks, we used the top holdings of the bank's PC & Mobile Device AI Upgrades basket (GSXUPCAI).

For these hardware stocks, we also mentioned hedge fund investors. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Hardware

14. Seagate Technology Holdings plc (NASDAQ:STX)

Number of Hedge Fund Shareholders In Q1 2024: 52

Seagate Technology Holdings plc (NASDAQ:STX) is storage company that makes and sells products such as hard disk and solid state storage drives. In an analyst note that came out in May 2024, Mizuho raised the firm's share price target to $110 from $100 and kept a Buy rating on the shares. At the heart of the increased price target was Mizuho's belief that Seagate Technology Holdings plc (NASDAQ:STX)  can continue to benefit from the growth in global cloud and enterprise computing platforms.

Seagate Technology Holdings plc (NASDAQ:STX) currently trades at a forward price to earnings ratio of 19.7. This is nearly in line with the S&P's forward P/E of 21, and it indicates that the market expects Seagate Technology Holdings plc (NASDAQ:STX) to perform in line with the broader index. Management however is more optimistic, as during a recent earnings call, it pointed to the potential of capturing the hardware market on the edge computing segment of the data center market. According to CEO Dave Mosley:

Analysts place this among the fastest-growing sectors for VIA applications worldwide. Within China, the pace and magnitude of demand improvement in VIA and other HDD markets will be shaped by economic recovery in the region. We continue to monitor the government’s efforts to spur economic growth, including stimulus plans aimed at digital transformation and infrastructure spend. Recent economic indicators show signs of progress. However, it will take time for the benefits of these programs to take hold. Overall, we believe these constructive market trends support steady revenue growth throughout the calendar year. Our ability to deliver that growth is enhanced by our build-to-order initiative that is now in place with the majority of large mass capacity customers.

Overall, STX ranks in 14th place among the 15 best hardware stocks to buy according to famed investment bank. You can visit the 15 Best Hardware Stocks According To Goldman to see the other hardware stocks. While we acknowledge the potential of STX as an AI investment, our conviction lies in the belief that some 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. The article was originally published at Insider Monkey.