Under oligopoly, HDD prices and quantities soar! Bank of America Corp has raised its target prices for major manufacturers Western Digital Corporation (WDC.US) and Seagate Technology Holdings PLC (STX.US).

Notice that both Western Digital Corporation (WDC.US) and Seagate Technology Holdings PLC (STX.US) are maintaining a clear trajectory of profit growth, prompting Bank of America Corp to raise the target prices for both companies. Analysts led by Wamsi Mohan at Bank of America Corp stated in an investor report on Monday, "As manufacturers have not increased unit capacity, the supply of hard disk drives (HDD) remains tight, and we believe this is a structural change. Therefore, we continue to see demand exceeding supply and believe there is still room for further price increases for original equipment manufacturers (OEMs)." Bank of America Corp raised Seagate's target price from $605 to $700 and Western Digital Corporation's target price from $415 to $495. In a bullish scenario, Bank of America Corp found that both companies could see a significant increase in earnings per share (EPS) by 2028. Seagate Valuation Analysis The analysts stated, "We estimate that the current stock price of around $587 reflects EPS of $29 for the calendar year 2028 (based on a 4% compound annual growth rate of the near-line storage price per TB and a 47% operating profit margin for 2028). We assume a price-to-earnings ratio of 20 (which we believe matches Seagate's profit margin characteristics). However, in a bullish scenario, we believe its EPS potential could reach $45 (with the near-line storage price per TB reaching $20 in 2028, a three-year compound annual growth rate of 16%, and an operating profit margin of 55%)." Western Digital Corporation Valuation Analysis Regarding Western Digital Corporation, Bank of America Corp stated, "We estimate that the current stock price of around $400 reflects EPS of around $20 for the calendar year 2028 (based on a 0% compound annual growth rate of the near-line storage price per TB, meaning no growth, and a 45% operating profit margin for 2028). We assume a price-to-earnings ratio of 20 (which we believe matches Western Digital Corporation's profit margin characteristics). However, in a bullish scenario, we believe its EPS potential could reach $33 (with the near-line storage price per TB reaching $20 in 2028, a three-year compound annual growth rate of 12%, and an operating profit margin of 55%)." As both companies secure long-term contracts with customers, the visibility of their business continues to improve. Wamsi added, "The market is still in an oligopoly state (with only three OEMs providing mechanical hard drives), and we believe the threat of new entrants into the market is low." The stock prices of Seagate and Western Digital Corporation have more than doubled since the beginning of this year. The Comeback of Hard Drive "Veterans" In a time where solid-state drives (SSDs) are advancing rapidly, many had predicted that hard disk drives (HDDs) would decline. However, the significant increase in target prices for Seagate and Western Digital Corporation by Bank of America Corp serves as a wake-up call to investors who underestimated this industry. The current hard drive market is undergoing an unprecedented "structural transformation," where it is no longer synonymous with cheapness but rather the most solid profit fortress under the wave of data centers and AI. Oligopoly The current hard drive market is in an "oligopoly" state. After years of fierce price wars and mergers, the global HDD market has dwindled down to only three major players: Seagate, Western Digital Corporation, and Toshiba. In terms of market share, Western Digital Corporation and Seagate form a dual oligopoly, each holding about 40%-41%, while Toshiba holds around 19%. This highly concentrated market forms a natural and high "moat." For potential challengers, the capital expenditure and technological accumulation required to develop high-capacity hard drives are astronomical. In the current market of stock game entry, hardly any new force is willing (or able) to enter. This stable tripartite structure has allowed existing manufacturers to abandon the irrational competition of "selling at a loss to attract customers" and instead pursue higher quality profit levels. The decline of the consumer market and the outbreak of the data center market are reshaping the product strategy of manufacturers. In the revenue structure of Western Digital Corporation and Seagate, the consumer-level HDD has dropped from over 20% to less than 10%. Limited capacity is now prioritized for enterprise customers with higher profits, effectively marginalizing consumer-level products. This structural shift has transformed the market from "comprehensive coverage" to "precision focus." The "continuously tight supply" is not accidental but a strategic choice by manufacturers. In the past, hard disk drive companies seized market share by increasing capacity, leading to a price collapse. However, analysts now point out that manufacturers are halting the increase in unit capacity. Contrary Price Trend This marks the shift of the HDD industry from "scale-driven" to "profit-driven." With capacity locked and the demand for massive storage from data centers and cloud computing platforms continuing to surge under the push of the AI wave, the market balance is rapidly tipping in favor of sellers. The price trend of mechanical hard drives showed a remarkable "counter-cyclical" increase in 2024-2025. In 2024, HDD shipments saw the first growth in a decade, with overall sales soaring by 50% compared to 2023, and the average selling price reaching a peak level not seen since 1998. In the second half of 2025, Western Digital Corporation and Seagate announced price increases, leading to an average 50% price increase in the mainstream HDD prices within four months, with some models rising by up to 66%. Although Seagate's capacity for 2026-2027 has been fully sold out, the CEO of Western Digital Corporation explicitly stated, "We do not want to build capacity for unknown purposes." This proactive limitation of supply, coupled with the shift of consumer-level capacity to enterprise level, has created a tight supply-demand balance in the market, further driving up prices. Restructuring of Valuation Logic The hard drive market is currently undergoing a profound "value reassessment." In an absolute monopoly situation, the demand for AI cold data storage has shattered the destiny of the HDD as a "sunset industry," shifting it from "quantity-driven price decline" to "quantity-stable price increase." The control production strategies of the three giants and the strategic abandonment of the consumer-level market signify the industry's entry into a new phase of "high-profit, high-precision" operations. When Seagate's target price is raised to $700 and Western Digital Corporation is seen favorably at $495, the market is actually signaling a "high certainty" bet. In the blueprint for 2028, the EPS of these two giants are expected to reach $45 and $33 respectively. The stock prices of these two companies have more than doubled since the beginning of this year, which is not a bubble but a reassessment of the value of HDDs. In the era where data becomes the "new oil," as the barrels that carry this oil, HDD giants are now enjoying their oligopoly dividend.