Hard drives have become surprisingly valuable in the AI boom. Data centers need enormous amounts of storage, and demand has been so strong that manufacturers have committed production years in advance while charging higher prices. That comfortable position is facing its first real test as Toshiba prepares to expand capacity.
Toshiba wants a bigger slice
Toshiba is putting around $380M into expanding production, aiming to produce twice as much hard drive storage for AI data centers by fiscal 2027.
The expansion is already taking shape in the Philippines, where Toshiba confirmed its first shipments from the upgraded Laguna Technopark facility on October 2. By October 5, Philippine officials had unveiled plans for an investment worth billions of pesos, with roughly 3K jobs expected to follow.
Toshiba aims to nearly double annual storage capacity at the facility by fiscal 2027 compared with fiscal 2025. That means more total storage space, not necessarily twice as many physical drives.
Demand isn't slowing yet
Toshiba's plans sound threatening, but the industry still has more buyers than available supply. Nearline hard drives, which cloud companies use to store massive amounts of data, are expected to face a 300-exabyte shortfall in 2026, equivalent to roughly 10% to 15% of demand.
That gap could widen to around 400 exabytes in both 2027 and 2028, giving manufacturers room to maintain pricing even as production expands. Nearline drives have recently sold for roughly $14.30 to $14.90 per terabyte.
Nearline Hard Drive Supply Gap, 2026-2028
| Year | Expected shortfall | Share of demand |
|---|---|---|
| 2026 | ~300 exabytes | 10%-15% |
| 2027 | ~400 exabytes | |
| 2028 | ~400 exabytes |
One analyst estimates Toshiba's additional production would cover just 9% to 15% of new demand in 2027. In other words, the expansion may ease shortages without immediately ending the industry's pricing advantage.
Buyers have already booked ahead
That advantage is particularly important for Western Digital and Seagate, which have already committed much of their future production to customers.
Western Digital reportedly sold out its 2026 output by February, with most of 2027 already covered by long-term agreements. Seagate has allocated much of its nearline capacity through 2028, leaving both companies relatively insulated from an immediate increase in supply.
Western Digital is also negotiating contracts extending to 2031. That visibility, combined with its net cash position and lower valuation, helps explain why one analyst favors the stock with a Buy rating while keeping Seagate at Hold.
Wall Street is getting cautious
Analysts aren't ignoring Toshiba's expansion, even if they expect demand to remain strong. Wells Fargo lowered its Western Digital price target from $730 to $450 and Seagate's from $1.18K to $865, while maintaining Overweight ratings on both.
The bank still expects industry revenue growth of at least 25% to 30%, with gross margins potentially reaching 60% to 65%. UBS also reduced its Western Digital target from $525 to $470, citing uncertainty over future supply and pricing.
The bigger concern may emerge closer to 2028, when Western Digital and Seagate's own technology advances could add to industry output. Both are enjoying record margins, but that becomes harder to sustain if production eventually catches up with demand.
For investors, the question isn't whether Toshiba can build more drives. It's whether the industry can keep charging today's prices once everyone else starts producing more, too.
