Back in January, CMC Aureon noted that the four top data storage firms – Sandisk [SNDK], Western Digital [WDC], Micron Technology [MU] and Seagate [STX] – had quietly outperformed the rest of the S&P 500 over the course of 2025. 

Then Jensen Huang called data storage a “completely unserved market” and sparked something of a frenzy: Sandisk spiked nearly 28% in a single session following Huang’s pronouncement, and its peers logged comparable gains.

All in all, it was shaping up to be an exciting year for these rather unglamorous stocks. Now, six months later, let’s focus on one company and see whether the sector has delivered on that potential.

Seagate: AI turnaround story

Founded in 1978, Seagate Technology helped pioneer the hard disk drive industry and grew into one of the world’s largest suppliers of data storage hardware.

It first went public in 1981, but was taken private in 2000 through a $20bn buyout led by private equity firm Silver Lake Partners. The company re-entered the public market in 2002 with an IPO on the New York Stock Exchange.

For much of the past decade, the company was grappling with a mature PC market, falling HDD demand and increasing competition from solid-state drives. However, the rise of cloud computing, hyperscale data centres and, more recently, artificial intelligence (AI) has reshaped its outlook.

Today, Seagate is positioning itself as a key beneficiary of the AI infrastructure buildout. Its high capacity nearline drives remain one of the most cost-effective ways to store the vast datasets required for AI training and inference. The company has also invested heavily in heat-assisted magnetic recording (HAMR) technology, enabling larger-capacity drives and helping drive a sharp recovery in revenue, margins and profitability through 2025 as cloud demand accelerated.

STX stock began to climb at the start of 2025 and is up more than 630% over the past 12 months as of 18 June, and nearly 9,000% above its IPO price.

Easy Q3 earnings beat

Reporting at the end of April, Seagate delivered a standout Q3 FY2026, as booming demand from AI infrastructure and hyperscale data centres fuelled stronger-than-expected growth. Revenue rose to $3.11bn, while non-GAAP EPS reached $4.10, comfortably ahead of analyst forecasts. The company also generated $953m in free cash flow, with GAAP gross margins expanding to 46.5%, indicative of both favourable pricing and a richer mix of high-capacity drives.

Management struck an optimistic tone on the outlook. For Q4 FY2026, Seagate expects revenue of approximately $3.45bn, plus or minus $100m, alongside adjusted EPS of around $5.00. The guidance reflects continued supply constraints across the storage market and growing demand for the vast amounts of data capacity required by AI applications. Investors have responded positively, sending the stock to fresh 52-week highs as Seagate increasingly emerges as a beneficiary of the AI infrastructure boom.

The company has also continued to strengthen its balance sheet and reward shareholders, retiring $641m of debt and returning $191m through dividends and share repurchases during the quarter. Together, the results suggest Seagate is enjoying one of the strongest periods of growth and profitability in its recent history. 

“We believe Seagate is entering a new era of structural growth as AI applications amplify data creation and support sustained storage demand. Our areal density-driven product strategy enables us to deliver higher-capacity, energy- and capital-efficient storage at scale,” said CEO Dave Mosley.

View from the Street

The question for investors is whether that potential growth has already been priced in, or if the stock still has room to run.

Many analysts think that the stock can continue its climb. On 12 June, for instance, JPMorgan raised its price target to $920 from $775, reaffirming an ‘overweight’ rating. A few days later, Morgan Stanley also lifted its target to $1,035 from $767, and likewise reiterated an ‘overweight’ rating.

Of the 24 analyst opinions collated by Yahoo Finance in June, four are a ‘strong buy’, 16 a ‘buy’, three a ‘hold’ and one a ‘sell’. Significantly, however, the average price target is $898.09 – some 19% below the $1070.23 recorded on 18 June.

Competitor comparison: WDC vs SNDK vs STX

Let’s unpack how Seagate compares to two other major players in the space. 

Following its 2025 separation from Sandisk, Western Digital has become a pure-play hard disk drive company focused almost entirely on hyperscale and enterprise storage. That positioning has made it one of the clearest beneficiaries of the AI infrastructure boom. 

In its latest quarter, revenue rose 45% year-on-year to $3.34bn, while management guided for further growth as cloud providers continue building AI data centres. Investors are particularly attracted to the company’s pricing power: demand for high-capacity drives is outstripping supply, and management has indicated that AI-related storage requirements are creating unusually strong visibility. 

The company has also launched a $4bn buyback programme, reinforcing the shareholder-return story alongside accelerating earnings growth.

For its part, Sandisk offers investors a different way to play the AI storage theme. Rather than hard drives, it focuses on NAND flash memory and enterprise solid-state drives, products increasingly used in AI data centres, where speed matters more than cost. 

The company’s latest results highlighted explosive momentum: quarterly revenue nearly doubled to $5.95bn, while data centre revenue more than tripled on demand for AI-related storage. Management has increasingly shifted the business toward higher-value enterprise markets, helping drive profitability and improve earnings visibility. 

While the stock has rallied sharply, investors remain attracted by tight NAND supply, rising prices and the prospect of sustained AI-driven demand growth.

This is how the fundamentals of the three stocks currently compare.

Source: Yahoo Finance

Conclusion: The investment case for STX stock

Seagate’s investment case ultimately rests on a simple proposition: that the AI boom will create exponentially more data than can realistically be stored on expensive flash memory alone. If that thesis proves correct, Seagate’s leadership in high-capacity hard drives and HAMR technology could support years of elevated demand, pricing power and margin expansion. The bull case is that AI-driven data creation is still in its infancy, allowing Seagate to compound earnings faster than the market currently expects.

The bear case is that much of this optimism may already be reflected in the share price. After a remarkable rally, expectations are high, and any slowdown in hyperscaler spending, easing of storage supply constraints or acceleration in flash-memory adoption could pressure growth and valuations.

Compared with Western Digital, Seagate appears to offer a stronger profitability profile and a clearer technological edge through HAMR. Against Sandisk, it provides more direct exposure to the lower-cost bulk storage layer underpinning AI infrastructure. 

So, has Seagate’s AI-driven growth already been priced in? While the stock’s valuation leaves less room for error than it once did, the strength of the underlying demand trend suggests investors may still be underestimating the scale of the opportunity.

CMC Aureon’s proprietary theme relevance system maps the world’s biggest investing megatrends. For in-depth analyses of stocks with high growth potential, subscribe to CMC Aureon Foresight.