Nicholas Mugalli
Institutional TMT & Macro Research, AI/Semiconductors/Policy
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's answer to demand exceeding supply is denser drives rather than new factories, which can mean higher margins on the same footprint and a faster timeline. Its CEO told JPMorgan new factories would take too long; HAMR puts more data on each drive, and if 50% of exabytes ship on HAMR by H2 2026, Seagate closes the supply gap without building capacity. The stock fell 8% as investors heard it won't add capacity. H2 2026 will show whether density beats volume. x.com
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 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
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
Western Digital benefits from HDDs' low storage cost and growing cloud demand, with higher NAND prices adding pricing power. Nearline bit demand normally grows 20-25% with some deflation, while AI data growth now exceeds 30%; HDD costs ~$0.02-$0.03/GB versus ~$0.25 for NAND. Before AI, the consolidated, ~95% cloud-exposed market looked worth a low-to-mid-teens multiple of normalized EPS. Entry barriers are extremely high, but irrational competition among the three players is a risk. x.com x.com … Show more
Sandisk's datacenter shipments and restrained bit-supply plan strengthen its growth case, without settling contract protection in a downturn. Management attributed roughly 60% of fiscal Q1 revenue growth to volume and 40% to price; datacenter sales rose 61% sequentially to $4.8B, supplying 88% of total growth. It retains mid-to-high-teens bit growth rather than accelerating supply. Consumer sales fell 29%, and the CFO cautioned against carrying Q2's growth rate into fiscal Q3. x.com 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
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
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 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
