Seagate, WDC Fall as Toshiba Plans to Double HDD Output

Seagate (STX) and Western Digital (WDC) fell 7% to 11% on October 2 after Nikkei reported that Toshiba will double AI data-center hard-drive capacity by fiscal 2027.

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Shares of Seagate Technology and Western Digital dropped sharply in Friday trading, October 2, after Nikkei reported that Toshiba plans to double its hard-disk-drive production capacity within fiscal 2027. Seagate fell roughly 10-11% and Western Digital about 7%, with Seagate trading near $850 in the morning session. The declines came as the broader market rose, with the S&P 500 up about 0.7% and the Nasdaq up more than 1%.

The selloff hit two of the year's strongest ai stocks in the storage sector. Seagate had gained more than 200% year to date before the drop, and Western Digital more than 140%.

What Did Toshiba Announce?

Toshiba plans to invest about ¥60 billion to add production lines at its factory in the Philippines and to double capacity for data-center hard drives by fiscal 2027. The company will also introduce new products that raise storage capacity per drive by as much as 40%. Longer term, it is working toward mass production of 65-terabyte-class drives around 2030, followed by 100-terabyte-class models.

Toshiba is one of three global hard-drive suppliers, alongside Seagate and Western Digital. It holds just over 10% of the market by storage capacity and has set a medium-term goal of 30%. The expansion is aimed at demand from AI infrastructure, where hard drives store the large volumes of training data, video and archives that flash memory handles less economically.

Why Did Seagate and Western Digital Shares Fall?

The shares fell because added Toshiba supply could ease the shortage that has given the two U.S. companies strong pricing power. Both have posted soaring earnings and share prices over the past year as the AI buildout created a supply crunch in data-storage products.

Seagate's nearline capacity, the high-capacity drives sold to cloud providers, is nearly fully allocated through calendar 2027. Western Digital guided fiscal first-quarter 2027 revenue to $4.1 billion, plus or minus $100 million. With valuations already stretched after the year's rally, a credible third source of capacity gave investors reason to take profits.

The reaction reflects a structural point. A three-player market with limited spare capacity supports firm pricing and long-term customer commitments. A competitor aiming for triple its current share changes that balance, even if the new output arrives gradually.

How Big Is the Threat to the Incumbents?

The near-term threat is modest, and the long-term threat is larger. Doubling capacity from a base of just over 10% adds supply that would take time to qualify with hyperscale customers, whose procurement cycles run for months. Seagate's allocation through 2027 and Western Digital's guidance suggest demand still exceeds supply in the immediate term.

The ¥60 billion outlay is also small next to the capital the sector has committed to AI-related capacity. The 30% share target is the more consequential figure. Reaching it would mean taking volume from Seagate and Western Digital in a market where data-center demand is the main growth driver.

What Comes Next for Hard-Drive Pricing?

Hard-drive pricing is likely to stay firm through 2027, with the risk of softening shifting to later years as Toshiba's capacity comes online. Contract terms are the key variable. Long-term agreements with cloud customers have insulated Seagate and Western Digital from spot-price swings so far.

Three developments will show how far the Toshiba plan changes the outlook:

• Whether hyperscale customers qualify Toshiba's higher-capacity drives.
• Whether Seagate and Western Digital respond with their own capacity additions or pricing.
• How quickly the 65-terabyte-class roadmap advances relative to rival products.

Outlook

Friday's move repriced the risk that the storage supply squeeze eases sooner than expected. Seagate and Western Digital retain sold-out capacity and strong demand, but the expansion plan gives a third supplier a path to a much larger share. Their next earnings reports and any customer-contract commentary will be the first test of whether pricing power holds.