Trader C0bb
Derivatives Trader & Portfolio Manager, Creator of G-Ron TrendCloud
Seagate is the cleanest way to own a hard-drive market with only three makers left and no new capacity coming. Drives are sold out through 2026, with contracts written into 2028, and neither of the big two will add capacity, since spare capacity becomes worthless once flash eventually takes the tier. Seagate is about 100% HDD and 87% nearline, with HAMR drives shipping. 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 is the better bet than Western Digital because, where the industry is heading, Seagate has the superior product and Western Digital is late to the game. 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
Western Digital's HDD exposure is hard to get behind because hard drives are even more commoditized than DRAM and NAND. HBM, by contrast, is difficult to make. x.com
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
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 is about to play catch-up with the memory space. It has lagged as Micron, Sandisk, Samsung and SK Hynix ride NAND, DRAM and HBM price spikes, because it rides capacity storage for AI data lakes, which is real demand but a different, slower-moving market. 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
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
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