Why Western Digital and Seagate are seeing big stock drops today

By Emily Bary and Britney Nguyen

Investors are worried that Toshiba will boost its production of a key AI storage product, potentially hurting the strong pricing power that Western Digital and Seagate currently enjoy

Seagate Technology could be affected by a reported planned expansion into HDD manufacturing by Toshiba.

Shares of Western Digital and Seagate Technology fell hard on Friday, reflecting concerns about the potential for heightened overseas competition in the market for hard disk drives.

The fears stem from a Nikkei Asia report that Japan's Toshiba plans to double its manufacturing capacity of HDDs for artificial-intelligence applications during its 2027 fiscal year, which runs through March. The report also noted that the company's planned expansion of a plant in the Philippines would mark its first meaningful investment in hard disk drives in half a decade.

Hard disk drives, which enable the storage of vast amounts of data, have become a key component of the AI build-out. Storage and memory components are in short supply, allowing manufacturers to sell their current offerings at high prices and realize strong profits.

If significant additional supply floods the market, it could cut into the pricing power that major players Western Digital (WDC) and Seagate (STX) currently enjoy.

Toshiba could not be immediately reached for comment.

Seagate and Western Digital shares each fell 10.2% on Friday, off intraday lows for both. Seagate's drop was its worst single-day decline since July 2, when it fell 10.4%, according to Dow Jones Market Data.

Mizuho trading-desk analyst Jordan Klein noted that the report will likely make investors question whether Seagate and Western Digital can achieve upbeat expectations for gross margins, a measure of profitability.

Still, Klein said it's unclear how much capacity Toshiba will be able to add and how quickly it could do so. While this additional supply could eventually give large cloud providers more leverage in negotiating prices with Seagate and Western Digital, Klein said it would likely not impact contract discussions before 2028.

In Klein's view, Seagate "has a major technology lead over Toshiba" and Western Digital. Therefore, he said he's not worried yet about customers quickly moving away from the company - also because HDD demand is so far ahead of supply.

Evercore ISI analyst Amit Daryanani said investors should focus on supply discipline at HDD makers and the durability of long-term demand rather than near-term financial impacts. On that front, the setup looks positive for Western Digital and Seagate, he said, given supply volumes at both companies for 2027 are under contract and those for 2028 are mostly allocated to customers.

Additionally, Toshiba "can only grow as fast as its suppliers do" when it comes to components such as glass. That could take several months, he said, while Seagate and Western Digital make some of their own components.

-Emily Bary -Britney Nguyen

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10-02-26 1842ET