Seagate and Western Digital Tumble as Toshiba Threatens the HDD Supply Squeeze

Shares of hard-disk-drive makers Seagate Technology ($STX) and Western Digital ($WDC) are dropping sharply Friday after Nikkei Asia reported that rival Toshiba plans to double its data-center HDD production capacity by fiscal 2027 — threatening the tight supply that's driven both stocks' huge rallies this year.

What Toshiba announced

Toshiba plans to invest roughly ¥60 billion (about $380 million) to expand its manufacturing facility in the Philippines, doubling its HDD production capacity by fiscal 2027 to meet growing AI data-center storage demand. It's Toshiba's first major HDD capacity investment in roughly five years. The company is reportedly targeting a jump in its share of industry manufacturing capacity from just above 10% today to around 30% over the medium term — a target tied to capacity, not guaranteed shipments or revenue. New production lines are expected to yield drives with up to 40% more capacity per unit than current models, part of a roadmap that includes 65TB drives by 2030 and eventually 100TB drives.

Why it's hitting the stocks so hard

Loss of pricing power. Seagate and Western Digital have both benefited from unusually strong margins this year, driven by tight global HDD supply and surging cloud and AI demand — Seagate said in January that its 2026 nearline storage capacity was already sold out. Investors are reading Toshiba's expansion as a direct threat to that scarcity-driven pricing leverage.

New competition in a concentrated market. The HDD industry is dominated by just three players — Seagate, Western Digital, and Toshiba — so any capacity move by the smallest of the three carries outsized weight. This is Toshiba's first serious capacity expansion in about five years, and investors weren't expecting it.

Stocks primed for a selloff. Both stocks had posted massive year-to-date gains heading into Friday, leaving them especially sensitive to any sign that competition could intensify. Notably, the Roundhill Memory ETF (DRAM), which holds both Seagate and Western Digital, was up slightly on the day, underscoring that the selloff is concentrated in the pure-play HDD names rather than the broader memory and storage sector.

What could cushion the blow

A few factors may limit the near-term impact. Both Seagate and Western Digital beat earnings estimates in every quarter of fiscal 2026, and demand from AI data centers remains strong enough that Nikkei reports the industry-wide supply shortage is expected to persist for now. Long-term supply contracts also give both companies some protection against Toshiba's added capacity reaching customers quickly, and it remains unclear how fast Toshiba's expanded output will actually reach cloud buyers once it comes online.