Seagate Is the Better Trade, Analyst Says — but What's Holding Western Digital Back?

Seagate Technology Holdings Plc. (NASDAQ:STX) and Western Digital Corp. (NASDAQ:WDC) stock fell about 4% or more in Thursday’s premarket trading amid a broader semiconductor selloff, despite strong AI-driven demand for data storage.While both companies stand to benefit from growing storage needs, Bernstein analyst Mark Newman sees Seagate as the stronger near-term investment, citing rising hard-drive prices and a cost advantage over Western Digital.Western Digital, meanwhile, faces concerns over its next-generation technology, supply capacity and future pricing conditions.Newman Prefers SeagateNewman told CNBC on Wednesday that Seagate benefits from rising hard-drive prices, strong demand and a better cost structure than Western Digital.He called Seagate the better trade and expects hard-drive pricing to continue rising and accelerating for at least the next five quarters.Newman said customers have already committed to orders and pricing across that period, giving hard-drive companies better visibility into future demand and supporting earnings growth over the next several quarters.Western Digital Faces Technology and Pricing RisksNewman said Western Digital has underperformed partly because it is falling behind in next-generation hard-drive technology.He said that creates risk over roughly the next year as the company works to catch up, making its setup less attractive than Seagate’s.UBS analyst Timothy Arcuri also recently lowered his Western Digital price forecast to $470 from $525 while maintaining a Neutral rating.Arcuri cited uncertainty around hard-disk-drive supply capacity and future pricing conditions ahead of Western Digital’s late-October earnings report. See More: Top Value Stocks AI Keeps Storage Demand StrongNewman said AI continues to strengthen demand across the storage hierarchy. “Look, in AI, the core of AI is data,” Newman said. He said AI workloads require storage across DRAM, NAND, hard drives and even tape.Demand has become so strong that DRAM, NAND and hard drives are effectively sold out in some areas, pushing some customers toward tape storage.Rising Supply Adds Another Industry RiskInvestors are also watching possible increases in storage and memory supply.China’s ChangXin Memory Technologies has reported progress on denser memory-chip designs.Separately, reports that Toshiba plans to increase production capacity for AI-focused hard drives have raised concerns that additional supply could eventually pressure pricing.For Western Digital, investors are balancing strong AI-driven storage demand against technology execution, future HDD capacity and pricing risks. Newman sees Seagate as better positioned to benefit from the current hard-drive pricing cycle.Price Action: Seagate Technology shares were down 3.98% at $685.13 and Western Digital shares were down 4.67% at $347.08 during premarket trading on Thursday, according to Benzinga Pro data.Photo via Shutterstock Read Also: The Third Player: YMTC Overtakes Micron in Global NAND Shipment Volumes