S&P 500 slips, but losses kept in check as Nvidia climbs ahead of results
Investing.com -- Seagate Technology (NASDAQ:STX) stock climbed 2% following a bullish assessment from Kerrisdale Capital, which highlighted the company’s leading role in the hard disk drive (HDD) market and its promising technology advancements.
Kerrisdale Capital’s analysis points to Seagate’s significant market share in supplying HDDs to large-scale data centers, with over 80% of its revenue stemming from sales to major hyperscalers like Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL), Meta (NASDAQ:META), and Microsoft (NASDAQ:MSFT), as well as enterprise server and storage OEMs. The investment firm underscored the undeniable prospects of sustained data growth and the incremental storage demand driven by the burgeoning AI sector.
Seagate’s strategic transition to heat-assisted magnetic recording (HAMR) technology is expected to significantly boost density gains and profitability. The company’s foresight has positioned it years ahead of its primary competitor, Western Digital (NASDAQ:WDC), in the HAMR technology race. With Seagate’s first hyperscaler, Google, already qualified, and more announcements anticipated in the near future, the market’s current supply constraints are set to favor the rollout of Seagate’s HAMR products.
The investment firm emphasized the potential of Seagate’s upcoming 40TB HAMR product, slated for release in 2026, which is projected to enhance HDD unit economics through a 33% capacity gain and likely reduction in materials costs. This advancement is poised to accelerate profit growth and market share, bolstered by higher margins. Meanwhile, Western Digital is not expected to ship its first-generation 36TB HAMR drive until at least 2027.
Kerrisdale Capital’s outlook suggests that HDDs, thanks to HAMR technology, will continue to be the preferred technology for data center storage for the next decade. The cost efficiency of HDDs, being six times cheaper than solid-state drives (SSDs) on a cost/TB basis, coupled with the capital efficiency of HDD manufacturing, secures their value proposition.
The report also praised Seagate for its capital allocation, having returned over $8 billion to shareholders in the past five fiscal years, and hinted at the potential for future growth in shareholder returns. Despite Seagate’s advantageous position in the AI and data center boom and its technological leadership, Kerrisdale Capital noted that the company’s shares are trading at an "inexplicable" 11x 2026 earnings, suggesting a significant undervaluation and the potential for a substantial re-rating of the stock value.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.