The rise of AI is fueling a storage crisis that could boost the profits of Seagate Technology (STX) and Western Digital (WDC) for years.
“Hard drive supply remains tight as manufacturers are not adding unit capacity and we see this as a structural change,” Bank of America analyst Wamsi Mohan said in a recent note to clients. “As such, we continue to see demand outstripping supply and see continued room for OEMs to increase prices.”
Seagate and Western Digital are positioned to benefit. Data centers require high-capacity hard disk drives (HDDs) to store, train, and manage large-scale AI data sets. While GPUs, such as those from Nvidia (NVDA), process the data, HDDs remain the most cost-effective way to store the large amounts of information that underpin LLMs. These units are the backbone of major infrastructure providers such as Amazon (AMZN), Microsoft (MSFT), and Google (GOOG, GOOGL).
And the industry has changed. Mohan described the sector as an “oligopoly” with only three main players. The third, Toshiba, is not explicitly included in the firm’s report. “We see a low threat of new entrants entering the market,” he added.
The lack of competition gives the remaining giants immense pricing power as technology companies fight for hardware.
Mohan suggests that for Seagate, earnings could nearly double to $45 per share in a bullish scenario by 2028. He raised his price target for the stock to $700, applying a 29x multiple to his 2027 earnings estimate. Meanwhile, he believes Western Digital’s potential earnings will reach $33 per share, setting a new price target of $495 based on the same aggressive valuation.
Investors have already begun to take notice. Over the past 12 months, Seagate shares have soared nearly 600%, while Western Digital shares have risen roughly 850%.
And companies have the numbers to back it up. Seagate reported fiscal 2025 annual revenue of $9.1 billion, a 39% year-over-year increase. In its latest quarterly results on April 28, the company posted $3.11 billion in revenue, a 44% increase from a year earlier, beating analyst expectations of $2.95 billion, according to Bloomberg data. Adjusted EPS hit $4.10, beating expectations of $3.50.
Western Digital has also shown momentum. In fiscal 2025, annual revenue reached $9.52 billion, an increase of 51% year-over-year. In its most recent second-quarter report, the company posted revenue of $3.02 billion, a 25% increase that beat Wall Street’s estimate of $2.98 billion, according to Bloomberg data. Adjusted EPS of $2.13 beat expectations of $1.95. The company is scheduled to announce its third-quarter results on April 30.
