Daave “3 and 30” Tepper
Institutional Endowment Investor
Seagate is set for another good quarter, with gross margin likely to beat again, as nearline HDD prices rise alongside exabyte growth. Per @NEWS2082680, AI data centers pushed nearline HDD prices up about 10% quarter over quarter in April-June, a huge move. Seagate is growing exabytes through density gains rather than adding heads. x.com
Seagate is taking Western Digital's lunch money by leading the hard-drive race in areal density, which ultimately brings the industry's price per exabyte down; Seagate may have about a six-month lead. Its positive divergence from Western Digital has accelerated over the last 30 days and even the last five, with Seagate up 3% and Western Digital down 2% after Western Digital's earnings, raising the question of whether it is falling further behind on HAMR. x.com x.com
Seagate's gross margin jump to 57.8% from 52.7% shows pricing power in a supply-constrained hard-drive market. AI data needs storage, hyperscalers seek capacity, and HAMR packs more terabytes into existing factories; roughly 90% of big-cloud data sits on hard drives. Sales reached $4.2B and next-quarter guidance of $4.8B beats the Street's $4.53B. This cycle looks to be accelerating rather than peaking. Overweight, $1,050 target. x.com x.com
Seagate has shown very resilient price action over the last few weeks, with this week's gain double Micron's. x.com
AI data and content creation could lift Seagate's and Western Digital's cross-cycle earnings even if supply catches up and pressures prices and margins. Western Digital reported hyperscaler demand signals through 2030/31, making 2013-2024 normalized earnings a poor baseline. Still not a huge fan of their stocks given their large premium to memory makers and Toshiba's production ramp. x.com x.com
Seagate's results suggest AI demand may be changing how storage is valued, beyond a normal cyclical upturn, lifting Seagate, Western Digital and SanDisk. Its gross margin reached 47% and free cash flow $953 million; data center revenue rose 55% to $2.5 billion, nearline capacity is mostly allocated through 2027, and guidance of $3.45 billion revenue and $5.00 EPS beat expectations. After big gains these stocks must keep beating, so Western Digital and SanDisk results need to confirm it. x.com
Toshiba's plan to spend about $380M doubling HDD capacity for AI data centers by FY2027 is not a real threat to Seagate Technology. Toshiba holds only a small share of the market, and it will need a few more years to ramp production in a hard-drive market that is still supply constrained. x.com x.com
The valuation gap favors SK hynix and Samsung over Corning, Seagate and Western Digital. Companies trading at 20x are still called cheap while the memory makers trade at 2x; Corning is not cheap on a $4 run rate even with growth, and neither are Seagate or Western Digital. The gap should narrow as memory rises while HDD stalls. x.com x.com
Seagate owns the volume layer where AI training data ends up, nearline HDDs, and that supply tightens every quarter through 2027. Memory makers are capacity-bound, with Hynix and Micron sold out through 2026 and Samsung warning shortages run to 2027+; HBM holds hot data, while cold training data sits on nearline drives that Seagate and Western Digital dominate. Seagate leads HAMR, which packs more data per platter, a real density moat that justifies its premium 16.9x sales and 79 P/E. x.com … Show more
Seagate is close to best of breed in memory and storage, with strong free cash flow, a sustainable edge from its HAMR ramp and full entrenchment in data center and cloud. x.com
Toshiba's reported plan to expand hard-drive output makes Seagate's and Western Digital's pricing after 2027 much less certain. Their bull case leaned on all three HDD makers holding unit output flat; per Nikkei Asia, Toshiba will spend about ¥60B to double AI data-center HDD capacity by March 2028 and lift its share from just over 10% to 30%. Seagate's 2027 pricing is already contracted, so this hits the multiple rather than next year's numbers. Toshiba has not confirmed the report. x.com x.com … Show more
Rising memory contract prices strengthen the case for memory stocks still far below their highs. JPMorgan forecasts Q4 DRAM prices up 13% and NAND up 18%; Micron is 28% below its 52-week high, Seagate 44%, Sandisk 47% and Western Digital 55%. x.com
