Citi — North America Hardware and Storage: Coverage Rankings Update
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Following earnings season and its recent TMT conference, Citi Research refreshed its rankings of covered North American hardware and storage names. AI demand and capital expenditure remain the key drivers of strong demand and sizable backlogs across coverage, with long-term contracts, rising backlogs and some customer deposits or prepayments extending visibility. On components, Citi turned incrementally more positive on connectors as demand spreads from IT datacom into defense — a multi-quarter driver with sizable growth potential — plus power and energy infrastructure; Amphenol gained a positive Catalyst Watch and moved to number one in components. Within storage, HDD and NAND share prices should stay correlated, but Citi prefers HDDs for lower competitive intensity, capex discipline and margin-expansion potential; Seagate and Western Digital rank third and fourth while Sandisk slipped to fifth. Enterprise OEMs benefit from infrastructure modernization and accelerating enterprise AI adoption amid rising tokenomics costs, data-security concerns and data gravity; high backlogs underpin a multi-year supercycle, with revenue gated by supply constraints and supply procurement and management a key moat favoring scaled players. Top picks are Dell, HPE and Apple. Under the rating framework, Buy requires at least 15% expected twelve-month total return (25% for high-risk names), while Catalyst Watch or STV horizons run 30 or 90 days.
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