Data storage stocks Seagate and Western Digital poised to benefit from AI-driven demand as hard disk drive supply remains tight

Seagate reported fiscal 2025 annual revenue of $9.10 billion, a 39% year-over-year increase. In its latest quarterly results on Apr. 28, the company posted $3.11 billion in revenue—a 44% increase over the prior year—beating analyst expectations of $2.95 billion. Western Digital reported fiscal 2025 annual revenue of $9.52 billion, up 51% year-over-year, with second quarter revenue of $3.02 billion, a 25% jump exceeding the $2.98 billion estimate.

Hard disk drives (HDDs) remain the most cost-effective way to store vast amounts of data that underpin LLMs (large language models used for AI), despite GPUs processing that data. A Bank of America analyst noted that "hard disk drive supply remains tight as manufacturers are not adding unit capacity" and described the sector as an "oligopoly" with only three major players.

Bank of America's analyst projects that for Seagate, earnings could nearly double to $45 per share in a bull case scenario by 2028, with a price target of $700. For Western Digital, he sees potential earnings hitting $33 per share with a price target of $495. Over the last 12 months, Seagate shares have soared by nearly 600%, while Western Digital's have jumped by roughly 850%.