Seagate and Western Digital Fall as Toshiba Rivalry Intensifies Over TDK Bid
Key Takeaways
- •Western Digital shares fell 2.3% in premarket trading Tuesday to $431.37, extending a slide that began October 2 when reports emerged of Toshiba's plan to roughly double hard-drive production capacity by fiscal 2027.
- •Seagate and Toshiba are reportedly competing to acquire TDK Corp.'s magnetic-head business in a deal that could be worth several billion dollars, with no agreement announced so far.
- •Goldman Sachs maintained a Hold rating on Western Digital, warning that Toshiba's expansion could pressure pricing power and margins, while Morgan Stanley, Bernstein, Citi, and Evercore argued the Philippines factory expansion would be too limited to relieve tight nearline hard-drive supply.
- •Evercore pointed to Western Digital's vertical integration, including control of head wafers and magnetic media, as a structural advantage over Toshiba, and Wedbush analyst Matt Bryson said Seagate could face difficulty securing antitrust approval for a TDK acquisition.
- •TrendForce projects Toshiba will hold 10% of the global hard-drive market in 2026, compared with 48% for Western Digital and 42% for Seagate, while TDK shares rose 5.3% in Japan after news of the bidding contest spread.
Western Digital shares fell in premarket trading Tuesday, extending a volatile stretch linked to Toshiba's plans to expand its hard-disk-drive production. Seagate and Toshiba are reportedly competing to acquire TDK Corp.'s magnetic-head business in a deal that could be worth several billion dollars.
Wall Street analysts remain divided over the potential effect of Toshiba's planned capacity increase on Seagate and Western Digital. Seagate shares fell about 7.8% and Western Digital declined roughly 7% in early Tuesday trading, while TDK shares rose 5.3% in Japan after news of the bidding contest spread.
Western Digital slipped 2.3% in premarket trading to $431.37. The decline added to a difficult period for the stock that began October 2, when shares plunged more than 10% following reports that Toshiba planned to roughly double its hard-disk-drive production capacity by fiscal 2027. Toshiba is reportedly targeting an increase in market share from about 11% to 30% over the medium term.
Western Digital shares rebounded Monday after several Wall Street firms said the selloff had been excessive. Tuesday's premarket decline put that recovery under renewed pressure.
Analysts Divided Over Toshiba's Expansion
Goldman Sachs maintained a Hold rating on Western Digital and warned that Toshiba's expansion could pressure pricing power and margins over the medium term.
Morgan Stanley, Bernstein, Citi, and Evercore offered a different assessment. The firms said Toshiba's expansion of its Philippines factory would be too limited to relieve the tight supply of nearline hard drives, which has supported record margins for Western Digital. Nearline drives are the high-capacity disks used to store data in cloud and enterprise data centers.
Evercore also cited Western Digital's vertical integration, including its control of head wafers and magnetic media, as a structural advantage over Toshiba. Vertical integration allows a manufacturer to produce critical components in-house rather than depend on outside suppliers for them.
The broader market rose Tuesday, with the S&P 500 gaining 0.4% and the Nasdaq advancing 0.6%. The performance indicated that the weakness in Western Digital and Seagate shares was concentrated in the sector rather than reflecting broader market conditions.
Western Digital is scheduled to release its next earnings report on November 5, 2026. The company's supply outlook and Toshiba's expansion plans are expected to remain central factors for the stock until then, alongside the outcome of the contest for TDK's magnetic-head business, for which no agreement has been announced.
Seagate and Toshiba Compete for TDK's Magnetic-Head Business
Bloomberg reported Tuesday that Seagate and Toshiba are competing to acquire TDK Corp.'s business producing magnetic heads for hard drives. The transaction could be worth several billion dollars, according to the report.
Magnetic heads are essential components that read and write data on hard-drive surfaces. TDK currently supplies magnetic heads to Seagate, Toshiba, and Western Digital. A change in ownership would therefore place a supplier serving all three drive makers under the control of one of its customers. Seagate declined to comment, while Toshiba did not immediately respond to requests for comment.
The report was also described in a post by Bloomberg:
Seagate and Toshiba are locked in a contest for TDK's magnetic-heads business for hard-disk drives in a deal that could be worth several billion dollars — the latest attempt by AI-related hardware makers to keep pace with demand — Bloomberg (@business) October 6, 2026
The post is available on X at https://x.com/business/status/2107321202406555680?ref_src=twsrc%5Etfw.
Toshiba may have more at stake in the bidding contest than its rivals. Research firm TrendForce projects that Toshiba will hold 10% of the global hard-drive market in 2026, compared with 48% for Western Digital and 42% for Seagate. By those projections, the three companies account for the entire global hard-drive market, so the contest touches supply relationships across the industry.
Wedbush analyst Matt Bryson wrote that Seagate could face difficulty securing antitrust approval for a TDK acquisition. He said regulators, Toshiba, large customers, and Japan would view it as risky for the third-largest hard-drive maker to depend solely on Seagate.
The hard-drive market has expanded rapidly this year as artificial intelligence increases demand for data storage. Seagate and Western Digital shares have both risen sharply in 2026, a rapid advance that has increased caution around the stocks. Both companies' shares fell steeply Monday after the initial reports about Toshiba's capacity expansion.
Western Digital remains below its 52-week high of $799.87, although it is well above its 52-week low of $112.52 reached earlier this year.
