Eric Jhonsa
Technology Portfolio Manager at Dutch Asset
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 and Western Digital's large valuation premiums to DRAM and NAND makers weaken if Toshiba's aggressive production ramp ends the duopoly thesis. They should still earn a lot as demand soars, but Toshiba pushing beyond a 10-15% share changes things. NAND has cannibalized much HDD demand over 20 years and probably will take more, since much data-center HDD demand is warm or cool storage where SSDs save rack space and power. Their HAMR IP makes a hyperscaler rival unlikely. x.com x.com x.com x.com x.com
A supply response could compress Western Digital's pricing and margins, eroding its apparent cheapness. Its 2013-24 normalized earnings merit a look: even huge demand growth in other industries eventually drew supply and mediocre returns. A digestion/reset would hurt buy-and-hold investors, though the outcome is uncertain. Pre-AI economics were mediocre and unlikely to become amazing post-AI; TSMC's stronger pre-AI economics make its post-AI case better. x.com 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'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 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
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 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
Seagate and Western Digital trade at a huge multiple premium to other storage and memory, driven by vibes rather than cash flow, and Toshiba's expansion undermines the stable duopoly that justified it. Per @wallstengine, Toshiba plans about $380M to double HDD capacity for AI data centers by FY2027. Toshiba is a generation behind, with ramp issues, and is not a material near-term threat to profits, but the market will price the broken duopoly. The charts are awful. x.com x.com x.com x.com x.com
SanDisk's data-center flash growth shows AI inference is becoming a larger storage customer. Data-center revenue reached $4.8bn, up 61% in a quarter and over 40% of sales; total revenue of $11bn and EPS of $49.51 beat expectations. Guidance of $12.4bn revenue and $56 EPS suggests feared supply normalization has not yet eroded pricing. Overweight, with a $2,700 target. x.com x.com
Western Digital's margins are riding price increases that management sees lasting three to four more quarters. Price per terabyte rose 28% year on year while cost per terabyte falls less than 10%; December gross margin is guided to 60-61%. At about 10x fiscal 2028 consensus earnings, the stock prices in an early end to hikes despite scarce heads and media that WD mostly makes itself. Buy, $406. Long-term contracts cover less volume further out, leaving spot sales exposed if pricing turns. x.com … Show more
SanDisk CEO David Goeckeler's report of customer signals beyond fiscal 2030 adds storage to the long-duration AI hardware-demand case. He says those signals come through new-business-model partnerships; Micron and SK hynix in memory and Lumentum in photonics were already cited as signs of demand beyond 2030. x.com
