Data Storage Stocks Surge as Seagate Earnings Signal AI-Driven Boom
A blockbuster quarterly report from Seagate sent its shares to a record high and sparked a rally in rival Western Digital, as Wall Street bets on soaring AI demand.
Data storage companies Seagate Technology (STX) and Western Digital (WDC) rallied sharply on Wednesday after a stellar earnings report from Seagate signaled that the explosive growth in artificial intelligence is fueling a powerful rebound in demand for high-capacity disk drives.
Seagate shares surged nearly 20% to a new 52-week high after the company posted fiscal first-quarter results that significantly outpaced analyst estimates. The company reported revenue of $2.63 billion and adjusted earnings of $2.61 per share, breezing past consensus forecasts of $2.55 billion and $2.40, respectively. The strong performance triggered a sympathy rally in its primary competitor, Western Digital, which saw its stock climb more than 15% in afternoon trading.
The results suggest a robust recovery for a sector that has faced headwinds but is now positioned at the center of the AI infrastructure buildout. Seagate’s management highlighted exceptional demand from cloud and data center clients who are scrambling for storage to support generative AI workloads. This demand also helped the company achieve a record non-GAAP gross margin of 40.1%.
“The results validate the thesis that AI is an incremental tailwind for the storage industry,” analysts at Wedbush noted, as they raised their price target on Seagate to $290 from $260. The firm’s commentary reflects a growing belief that the sheer volume of data generated by AI models will drive a sustained and profitable upgrade cycle for drive manufacturers.
Wall Street's reaction was swift and broadly positive. Bank of America reiterated a Buy rating on Seagate and lifted its price target to $275, citing better-than-expected guidance on margins and sales volumes. Morgan Stanley followed suit, increasing its target to $270 and praising the company’s strong execution.
The enthusiasm quickly spilled over to Western Digital, as investors wagered that the positive industry trends would be reflected in its own upcoming financial results, scheduled for release on Thursday. The rally in Western Digital’s stock comes after Morgan Stanley named the company a “Top Pick” in late September, anticipating a strengthening hard disk drive (HDD) cycle.
For years, the HDD market was seen as a mature, slower-growth segment of the technology sector, gradually losing ground to faster solid-state drives (SSDs). However, the massive storage requirements of AI training models and large-scale data centers have revitalized demand for high-capacity HDDs, which remain the most cost-effective solution for storing vast quantities of data.
Both companies are benefiting from this resurgence. Seagate is ramping up production of its new high-capacity drives featuring Heat-Assisted Magnetic Recording (HAMR) technology, while Western Digital is seeing a full backlog of orders, according to Rosenblatt Securities. This surging demand has allowed producers to regain pricing power, boosting margins and profitability across the sector.
As the market digests Seagate’s strong report, all eyes will turn to Western Digital’s earnings call for further confirmation of the trend. Investors will be keen to see if the AI-driven tailwinds are lifting the entire industry, potentially setting the stage for a sustained period of growth for data storage providers.