Shares of Seagate Technology and Western Digital fell sharply Friday after a report that Toshiba plans to double its hard disk drive production capacity, 24/7 Wall St. reported. Seagate was down about 10% and Western Digital about 7% in morning trading, a reversal for two stocks that have soared this year on demand for data storage in AI data centers.

What Happened

Nikkei reported that Toshiba will double its hard drive output by fiscal 2027, with the expansion centered on its factory in the Philippines. According to Proactive, which cited the Nikkei report, Toshiba is investing about 60 billion yen, or roughly $400 million, in the effort.

By 8:52 a.m. EDT, 24/7 Wall St. said, Seagate had dropped to about $849.79 and Western Digital to about $429.45. The selling was confined to drive makers: the Roundhill Memory ETF rose 0.82%, and the Invesco QQQ Trust, which tracks the Nasdaq-100, gained 1.17%.

RelatedFirmus Pulls A$44 Billion ASX Listing After Weak Investor Demand

Declines deepened at points during the session. Proactive reported intraday drops of 13% for Seagate and 12% for Western Digital, while Yahoo Finance put the day's losses at about 11% and 7%.

Why It Matters

Only three companies make hard drives: Seagate, Western Digital and Toshiba. High-capacity nearline drives, the kind AI and cloud data centers buy in bulk to hold training data and archives, have been in short supply, giving the two U.S. leaders unusual pricing power. Yahoo Finance said Seagate shares were up more than 200% this year and Western Digital more than 140% before Friday.

Western Digital CEO Irving Tan had described that environment as a chance to gain more leverage on price, 24/7 Wall St. noted. A meaningful increase in supply from the third player threatens that leverage, which is what investors appeared to be pricing in.

Toshiba is starting from a smaller base. It holds a little over 10% of the market measured by capacity shipped and has set a medium-term goal of reaching 30%, according to Proactive. Gaining share on that scale would likely require competing on price as well as volume.

Limits on the Damage

Existing contracts soften the near-term effect. Seagate said in April that its nearline capacity was nearly fully allocated through calendar 2027, which means much of its output for the next year is already sold at agreed terms. New Toshiba capacity arriving over the same period would mainly affect pricing in later contract negotiations.

Building drives is also slow to scale. The expansion depends on equipment, component supply and manufacturing yields, and Toshiba will need to keep pace with rivals on per-drive capacity to win orders from cloud operators that prize density.

What to Watch

Seagate and Western Digital are due to report quarterly results in the coming weeks, and analysts are likely to press both on pricing, contract terms and whether they plan capacity additions of their own. Investors will also watch for confirmation of the plan from Toshiba itself, how quickly its new lines ramp and whether its push toward a 30% share comes with lower prices.