Computer storage product manufacturers Seagate Technology Holdings plc (NASDAQ:STX) and Western Digital Corporation (NASDAQ:WDC) are among the top performers on the market. The shares have rallied in today’s AI-driven market due to the massive demand for the firms’ storage products from the ongoing buildout. In his morning appearance on Friday October 2nd, Cramer discussed a recent major announcement by the Japanese firm Toshiba that generated a lot of weakness in the share price:
“And we’ve got some negative news, theoretically, about Seagate, which is going to send that stock down.
“Alright so Carl, one of the things that happens is that when you start talking about the different storage sections of the market, people tend to confuse things. This morning Toshiba did an HDD production capacity, they’ve announced it. It’s not they’re going to double what they make, and the two that are impacted are the two HDD companies Seagate and Western Digital in our country. They make the same product, so there’s a high direct impact, they compete.
“Look I think that there is going to be profit taking, but I think that pricing’s going to be maintained because the demand is so high. These are companies by the way that have not added the capacity that a lot of people would have liked. And they’ve been very strict about it. Very disciplined about pricing.”
For both Western Digital and Seagate, the ongoing AI buildout and the sustained demand for storage devices are the lifeline for sustainable growth. The pair’s revenue grew by 44% and 48% in their latest fiscal quarters. Fueling the revenue growth was cloud demand for Western Digital, which saw the firm’s cloud revenue grow by 43% annually to sit at $3.3 billion. Similarly, Seagate’s data center revenue surged by 57% annually to touch $2.9 billion.
However, while both firms are relatively similar when it comes to traditional storage devices, Seagate is leading the pack when it comes to next-generation heat assisted magnetic recording (HAMR) storage devices. These devices enable storing vasts amount of data in smaller spaces compared to predecessors. On this front, Seagate’s fourth quarter saw the firm report that 40% of its shipments to the data center segment were of HAMR drives.
The split stemming from HAMR is important when the two firms’ performance is compared. Western Digital leads Seagate in terms of revenue, non-GAAP gross margins, exabyte shipments, free cash flow and cloud revenue concentration. However, with HAMR, Seagate could reverse the trends. As HAMR drives pack more storage in a smaller area, successful execution leads to lower costs per drive to help with the margins. Similarly, they also contribute more towards exabyte shipments.
Exabyte shipments are also where Cramer’s comments about capacity come into play. While the CNBC TV host believes that Seagate and Western Digital have not added capacity and are playing it safe, HAMR drives can enable them to drive up exabyte output while not having to invest as aggressively into production expansion as others such as TSMC have to. Consequently, both firms aim to deliver 100 terabyte hard disks by the end of this decade through having grown their device storage capacity to deliver more storage per device instead of more devices through a production expansion.
However, the HAMR drives might also drive the proverbial valuation ceiling. Western Digital and Seagate’s forward P/E ratios are 22.83 and 25.71, which are substantially higher than their readings in June 2025. As a result, the HAMR execution could unlock further growth, especially since Toshiba aims to start producing HAMR drives in the second quarter of its fiscal 2028. Will HAMR unlock more value, or will capacity competition by the Japanese firm eat into data center market share? These questions could shape the valuation. As for Jim Cramer, neither stock made it into our list of 10 Blue Chip Stocks Jim Cramer is Crazy About.
Looking at hedge fund sentiment, the funds are significantly more optimistic about Seagate. According to Insider Monkey’s data, 131 funds had disclosed a stake in the firm in Q2 for a sharp jump over Q1’s 93, while 98 had held a stake in Western Digital compared to the 83 in Q1. For the former, short interest as a percentage of float 5.38% compared to 4.59% for the latter.
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