Data storage is so hot right now
A rapid turnaround in profitability helps explain how Seagate Technology and Western Digital have clawed to the top of the S&P 500 this year.
A sharp turnaround in profitability since the end of 2024 has helped ignite shares of data storage giants Seagate Technology and Western Digital this year, putting them among the top performers in the S&P 500 this year.
Seagate Technology Holdings recently overtook retail favorite Palantir Technologies as the best-performing company in the blue chips this year, rising more than 120% at last glance. Seagate competitor Western Digital is not far behind, with its gain of more than 110% putting it in the No. 3 slot.
The two disk drive makers charged to the front of the pack thanks to the sizzling rally over the last three months, during which time Western Digital rose more than 70% and Seagate more than 50%.
At the heart of the turnaround is the fact that the companies — which took a beating during the worst of the tariff-related wobbles earlier this year — have been able show Wall Street that they would have no problem dealing with any increased costs of imports thanks to the surge of demand for data storage.
That’s in part due to the fact that companies like Seagate have been able to ratchet up pricing and shift its sales mix toward higher-capacity, higher-margin data storage devices aimed at satisfying surging data center demand.
“Beginning of this calendar year, we said, every quarter we will see higher revenue, higher profitability, and we are going exactly in that direction,” Seagate Technology CFO Gianluca Romano said at a Goldman Sachs investor conference on Monday. “So, the pricing strategy is not changing, it is the same, so we expect a similar result.”
Western Digital — whose executives speak at the same Goldman Sachs conference later today — has seen a similar about-face in profitability, which it has largely attributed to the change of its sales mix toward higher-capacity drives aimed, largely, at the hyperscalers driving the data center boom.
“Higher-capacity drives typically translates into higher gross margin, and the company is executing really well on that,” Western Digital CFO Kris Alfons Sennesael said on the company’s latest earnings call, on July 30.
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