Here's a fun thing about commodity markets: the moment someone announces they're going to make more of something, the people already making that thing tend to freak out. That's basically what happened Friday in the hard disk drive world.
Western Digital Corp. (WDC) stock fell after reports that Toshiba plans to double its hard disk drive supply, raising concerns that additional capacity could eventually pressure pricing in the tight HDD market.
Seagate Technology (STX) stock also declined. Nasdaq futures rose 1.31%, while S&P 500 futures gained 0.97%.
Nikkei reported Thursday that Toshiba plans to double production capacity for HDDs used in artificial intelligence data centers by fiscal 2027 as the AI boom drives storage demand.
The company plans to invest about 60 billion yen, or $380 million, to expand facilities in the Philippines.
The planned expansion could raise concerns about future pricing in a market that has benefited from tight HDD supply. Western Digital's recent outlook has also been supported by strong demand and higher pricing.
S&P Global Raises Western Digital Outlook
On Sept. 25, S&P Global revised its outlook on Western Digital to positive from stable.
The ratings agency affirmed the company's "BBB-" issuer credit rating, citing stronger cash generation and low leverage.
Western Digital's revenue rose nearly 36% in fiscal 2026. S&P Global expects revenue growth of about 44% in fiscal 2027 and 30% in fiscal 2028.
The agency projects free cash flow of about $5 billion in fiscal 2027, up from $3.5 billion in fiscal 2026.
Customer Concentration Remains a Risk
Western Digital's three largest customers accounted for 16%, 15% and 13% of fiscal 2026 revenue, respectively.
Data center storage generated 89% of revenue.
S&P Global said it could revise the outlook back to stable if weaker AI or traditional information technology spending leads to HDD oversupply.
AI Boom Keeps Storage Market Tight
Despite Toshiba's expansion plans, nearline HDD supply remains constrained as AI data centers require increasing amounts of storage.
Nikkei said the shortage is expected to continue for the time being. Seagate said in January that its nearline storage capacity for 2026 was already sold out.
Demand has also benefited from tight supplies of memory chips. Solid-state drives offer faster performance than HDDs but cost significantly more, helping sustain demand for hard drives in large-scale data centers.
Global annual data generation is projected to quadruple from 2024 levels to 718 zettabytes by 2030, according to IDC, with about 60% expected to be stored on HDDs.
Price Action: Seagate Technology shares were down 11.22% at $839.44 and Western Digital shares were down 7.95% at $425.80 during premarket trading on Friday, according to market data.
