STX, WDC Stocks Sink On Toshiba’s Reported Plan To Double AI Hard-Disk Capacity: Analysts Call The Drop Overdone

Morgan Stanley, Rosenblatt, and Citi kept positive ratings on STX and WDC stocks, arguing that Toshiba’s plan is unlikely to close the industry’s supply gap.

• Morgan Stanley said the supply-demand gap through 2028 still looks wider than Toshiba’s planned addition, and that it would buy Seagate and Western Digital on the dip.
• Rosenblatt cast the plan as a bid to reclaim share toward a 30% target, not a flood of drives, while still calling it a medium-term risk for contracts running into 2029-2031.
• Citi said Toshiba does not make its own media and heads, so outside suppliers would also have to expand, which could limit the exabytes that reach the market.

Shares of Seagate (STX) and Western Digital (WDC) traded lower on Friday after a report stated that Toshiba plans to expand hard-disk drive capacity. But analysts at Morgan Stanley, Rosenblatt, and Citi largely treated the drop as overdone.

All three kept positive ratings on both stocks, arguing that Toshiba’s plan is unlikely to close the industry’s supply gap or erase the pricing power created by artificial-intelligence demand.

Seagate fell 12%, while Western Digital dropped 11%.

Toshiba Plans A Philippines Capacity Build

Nikkei Asia reported on Friday that Toshiba intends to invest 60 billion yen in its Philippines facilities to double production capacity for AI data-center drives by fiscal 2027. The industry has been capacity-constrained as cloud operators and AI builders absorb large volumes of high-capacity nearline drives, leaving little spare output and giving the two U.S. leaders unusual pricing power.

Buy The Dip, Says Morgan Stanley

Morgan Stanley said it understood the knee-jerk reaction. The firm noted that storage upcycles have historically ended with a supply shock rather than a sudden drop in demand, so any credible capacity announcement draws scrutiny. Even so, the bank argued that the gap between HDD supply and demand through calendar 2028 still looks wider than Toshiba’s planned addition.

It also pointed out that Toshiba lacks leading-edge capacity and heat-assisted magnetic recording technology, the process Seagate has been scaling for its highest-capacity drives. Morgan Stanley said it would gladly buy both stocks on the dip and reiterated Overweight ratings.

Market-Share Ambitions, Not A Flood, Says Rosenblatt

Rosenblatt framed the news less as a broad supply surge and more as an attempt by Toshiba to reclaim share toward its stated 30% ambition after years of losses to Seagate and Western Digital. The firm still called the expansion a credible medium-term risk. Extra capacity could give large customers incremental leverage while they negotiate long-term agreements that stretch into 2029–2031. Rosenblatt nonetheless expects the AI-driven imbalance to keep supporting pricing and the firm maintained Buy ratings on both names.

Component Limits Could Blunt Toshiba’s Plan, Citi Says

Citi highlighted a structural limit on how much Toshiba can actually add. Unlike Seagate and Western Digital, Toshiba does not make its own media and heads and would need outside suppliers to raise component output in tandem. That dependency, the firm said, could cap the net exabytes that reach the market and blunt the impact of the Philippines plan.

How Did STX, WDC Retail Traders React?

On Stocktwits, retail investor sentiment around WDC stock rose from bearish to bullish over the past 24 hours, while sentiment around STX stock moved from neutral to bullish.

Some Stocktwits users said they are buying more shares amid the selloff and STX’s earnings this month.

View this Stocktwits post

Another dismissed the selloff, highlighting that Toshiba’s investment doesn't seem too big.

View this Stocktwits post

STX stock has gained 203% this year, while WDC has gained 139%. 

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