The AI boom is fueling a storage crunch that could power Seagate Technology’s (STX) and Western Digital’s (WDC) profits for years.
“Hard disk drive supply remains tight as manufacturers are not adding unit capacity and we see this as a structural change,” Bank of America analyst Wamsi Mohan said in a recent note to clients. “As such, we continue to see demand exceeding supply, and see continued scope for OEMs to raise prices.”
Seagate and Western Digital are positioned to benefit. Data centers require high-capacity hard disk drives (HDDs) for storing, training, and managing large-scale AI datasets. While GPUs, like those from Nvidia (NVDA), process the data, HDDs remain the most cost-effective way to store the vast amounts of information that underpin LLMs. These drives are the backbone of major infrastructure providers like Amazon (AMZN), Microsoft (MSFT), and Google (GOOG, GOOGL).
And the industry has changed. Mohan described the sector as an “oligopoly” with only three major players. The third, Toshiba, is not explicitly included in the firm’s report. “We see low threat of new entrants coming into the market,” he added.
The lack of competition gives the remaining giants immense pricing power as tech companies scramble for hardware.
Mohan suggests that for Seagate, earnings could nearly double to $45 per share in a bull case scenario by 2028. He raised his price target for the stock to $700, applying a 29x multiple on his 2027 earnings estimate. Meanwhile, he sees Western Digital’s potential earnings hitting $33 per share, setting a new price target of $495 based on the same aggressive valuation.
Investors have already begun to take notice. Over the last 12 months, shares of Seagate have soared by nearly 600%, while Western Digital’s have jumped by roughly 850%.
And the companies have the numbers to back it up. Seagate reported fiscal 2025 annual revenue of $9.10 billion, a 39% year over year jump. In its latest quarterly results on Apr. 28, the company posted $3.11 billion in revenue — a 44% increase over the prior year — beating analyst expectations of $2.95 billion, according to Bloomberg data. Adjusted EPS hit $4.10, surpassing expectations of $3.50.
Western Digital has also shown momentum. In fiscal 2025, annual revenue reached $9.52 billion, up 51% year over year. In its most recent second quarter report, the company posted revenue of $3.02 billion, a 25% jump that exceeded Wall Street’s $2.98 billion estimate, according to Bloomberg data. Adjusted EPS of $2.13 beat expectations of $1.95. The company is scheduled to announce its third quarter earnings on Apr. 30.
