Wey How
Thematic Position Trader, Technology Stocks & Trend Following
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
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
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
Western Digital and Seagate benefit from hard drives being the most constrained part of the AI hardware supply chain. Per TrendForce data cited by @MelvinInvests, hard drives face the longest lead times at 50 weeks, and even with Toshiba expanding production, meaningful relief is unlikely before late 2027 because new capacity takes 12-24 months to build. x.com
Hard drives from Western Digital and Seagate are shouldering the bulk of the AI revolution's storage, and physical AI taking off would add even more demand. 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 holds a technology lead that rarely comes along in commodity hardware. Its HAMR drives are already qualified and in production with hyperscalers, while Western Digital's competing HAMR platform isn't expected to ramp until 2027. 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 and Western Digital look overvalued by anyone still setting price targets at 20x 2028 earnings when the outlook for the HDD makers is this clear. 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
