Data storage firms Western Digital, Seagate soar on AI-driven demand spike

Shares of data storage companies Seagate and Western Digital have surged over 200% this year, reaching near record highs, driven by the escalating demand for hard drives to support AI-related infrastructure. Western Digital recently forecast second-quarter earnings above Wall Street estimates, with J.P.Morgan analysts noting secured purchase orders through 2026 as a strong indicator of sustained demand. This sector-wide outperformance, which has seen the S&P 1500 tech hardware index hit a record, is fueled by major tech companies increasing capital expenditures for data centers, with Goldman Sachs projecting global AI infrastructure spending could reach $3-4 trillion by 2030.

Analysis

Data storage companies Seagate (STX) and Western Digital (WDC) have demonstrated significant market outperformance, with shares surging over 200% this year, primarily driven by the escalating demand for hard drives within AI-related infrastructure. Western Digital recently reported a 10.5% premarket gain after forecasting second-quarter earnings above Wall Street estimates, while Seagate's shares rose 20% following its own Q2 revenue and profit forecast beat. This positions both companies as top percentage gainers on the S&P 500.

This robust performance is underpinned by the critical need for storage capacity in the burgeoning AI sector. J.P.Morgan analysts highlighted Western Digital's secured purchase orders extending through CY26 with five major customers, signaling strong, sustained demand for storage. This indicates a fundamental shift in perception regarding the indispensable role of traditional storage in supporting advanced AI applications.

The broader S&P 1500 technology hardware, storage, and peripherals sector, which includes these firms, has climbed over 11% this year, reaching a record high. Major tech companies such as Alphabet, Microsoft, Meta, and Amazon are increasing capital expenditures for data centers, further fueling this demand. Goldman Sachs projects global AI infrastructure spending could reach $3 trillion to $4 trillion by 2030, suggesting a substantial and prolonged growth trajectory for storage providers.

Key Decisions for Investors

• Investors should evaluate increased exposure to data storage companies like Seagate and Western Digital, given their strong outperformance and critical role in scaling AI infrastructure.
• Monitor company-specific guidance and long-term purchase order trends, as these indicate sustained demand and revenue visibility in the rapidly expanding AI ecosystem.
• Assess current valuations and potential for short-term volatility following significant year-to-date gains, while closely tracking capital expenditure announcements from major tech firms.