AI Boom Drives 156% Surge in Seagate Stock

In the wake of the AI boom sparked by the launch of ChatGPT in 2022, numerous related sectors and stocks have experienced significant attention. Surprisingly, the hottest trend in 2025 has shifted towards an older segment of the tech industry: storage solutions provided by companies like Seagate and Western Digital. These established firms, known for their hard disk drives, have found themselves at the forefront of the AI revolution, benefiting from the surging demand for storage solutions that support AI computations.

Seagate Technology, a producer of computer hard disk drives, has emerged as one of the best-performing stocks in the S&P 500 index this year, with its stock price surging by 156%. Its competitor, Western Digital, has seen a 137% increase, placing it third in terms of performance. Additionally, Micron Technology, the largest memory chip manufacturer in the United States, has experienced a record-breaking 12 consecutive trading days of gains, with a year-to-date increase of 93%, ranking fifth.

For bullish investors, the meteoric rise of these traditionally low-profile companies indicates the sustained and broad impact of AI-driven demand for computational infrastructure. However, for bearish investors, this surge is seen as a sign that the market is being consumed by a bubble that is destined to burst.

The resurgence of old storage companies in the current AI frenzy is both unexpected and logical. Nearly three years after ChatGPT's debut, investments in the infrastructure supporting AI technology continue to pour in. Tech giants like Microsoft and Google invest hundreds of billions of dollars annually in semiconductors, networking equipment, and data center power, all of which are essential for training large language models and running AI workloads.

This investment has propelled companies like NVIDIA and TSMC to prominence, attracting global investor attention. Meanwhile, companies like Seagate and Western Digital, which produce hard disk drives, have been relatively overlooked despite their critical role. The origins of hard disk drives date back to the 1950s, with early models having a storage capacity of just 5 megabytes and weighing over 2,000 pounds. Today, personal computer hard drives can store up to 2 terabytes and weigh less than 1.5 pounds. These advancements are crucial for training large language models, which require vast amounts of data.

Similarly, memory chips produced by Micron, such as high-bandwidth DRAM, are essential for AI computations but have historically failed to capture the interest of ordinary investors. The shift in investor focus towards these less glamorous but essential components reflects a broader trend in the AI-driven market.

Other companies benefiting from this trend include Vistra, an electricity producer, which has seen significant gains in recent years. Broadcom, a chip manufacturer, has a market capitalization of 1.6 trillion dollars, with a 49% increase this year following gains of approximately 100% in 2024 and 2023. Sandisk, a digital storage and memory manufacturer, has also shown strong performance, surging over 100% since September 2.

Seagate, Western Digital, and Micron Technology have several advantages, including being among the most affordable stocks in the S&P 500 index due to their cyclical nature and relatively low investor following. Despite their current profitability, all three companies have reported losses over the past three years under Generally Accepted Accounting Principles (GAAP).

At the beginning of 2025, Western Digital's forward price-to-earnings ratio was less than 6 times, while Seagate and Micron hovered around 10 times. Although their valuations have since increased, they remain lower than the S&P 500 index, which has a forward price-to-earnings ratio of 23 times based on expected profits for the next 12 months.

Benchmark Co. analyst Mark Miller noted that Seagate has the highest valuation among the three companies, with a forward price-to-earnings ratio of 20 times. However, given the strong demand outlook for its products, Seagate's stock remains attractive. Miller recently raised the target price for Seagate to 250 dollars, the highest on Wall Street, indicating a potential 13% increase from the previous week's closing price of 221 dollars.

Miller's research report highlighted the increasing price and profit margins of Seagate's hard drives, suggesting that its price-to-earnings ratio could expand further from its historical highs.

However, as the stock prices of these old storage companies continue to double, risks are accumulating. Jonestrading's chief market strategist Michael O'Rourke, who experienced the dot-com bubble, noted that such behavior is common during bubble periods. When investors start looking for secondary and tertiary opportunities due to high prices of market leaders, it often indicates a late-stage cycle.

Forrest, with two decades of fund management experience, holds Micron Technology's stock due to its competitive advantage in the memory market. However, she cautioned that the AI concept is currently overhyped and that the development of use cases for this technology will take longer than most people expect.

Despite the generally positive outlook from Wall Street, the rapid rise of these stocks has led some analysts to question whether investors should take profits. For instance, Seagate's current stock price is more than 20% higher than the average Wall Street target, while Western Digital's price is over 10% higher than its 12-month average target. Micron Technology's stock price is also slightly above market expectations.

Some market professionals view these discrepancies as warning signs, suggesting that investors might need to consider exiting these positions. O'Rourke noted that historically, cyclical companies typically peak when their price-to-earnings ratios are low and bottom out when earnings are negative. Therefore, the optimal buying time is during a cyclical downturn when companies are unprofitable, while the selling time is when price-to-earnings ratios appear healthy.