Is Seagate (STX) Still a Buy After Its Nasdaq-100 Inclusion and AI-Driven Earnings Surge?

Seagate Technology Holdings (STX) has emerged as a focal point in the data storage sector, driven by its recent inclusion in the Nasdaq-100 Index and a surge in AI-related demand. As of December 2025, the company's stock price has surged 233% year-to-date, fueled by robust earnings growth and strategic positioning in the AI storage market. But with valuations now trading at a premium relative to peers, investors must weigh whether the stock remains a compelling buy.

Valuation Metrics: A Tale of Growth and Caution

Seagate's trailing P/E ratio as of November 2025 ranges between 30.87 and 37.42, depending on the data source. This is notably higher than the storage sector's peer group average of 19.49 and Western Digital's (WDC) 18.92 P/E according to analysis. While the premium reflects optimism about Seagate's AI-driven growth, it also raises questions about sustainability. A proprietary fair P/E ratio analysis suggests Seagate's stock is undervalued at 39.77x, given its earnings growth trajectory and market leadership in high-capacity storage according to analysis. However, the company's Price-to-Book (P/B) ratio remains problematic, with a negative book value per share of -$2.13 as of June 2025 according to data, complicating traditional valuation comparisons.

The stock's current price of $258.67 is 9.9% below its estimated fair value, suggesting potential upside if earnings momentum continues. Yet, Seagate's debt load-while manageable-remains a drag on financial flexibility according to reports, tempering enthusiasm for aggressive multiple expansion.

Earnings Momentum: AI and Cloud Infrastructure as Catalysts

Seagate's Q3 2025 results underscore its transformation into an AI infrastructure enabler. The company reported a 21.3% year-over-year revenue increase and a significant earnings beat, driven by surging demand for its Mozaic platform. This platform, leveraging Heat-Assisted Magnetic Recording (HAMR) technology, is critical for meeting the exabyte-scale storage needs of AI training and cloud service providers according to industry analysis. Analysts project earnings to grow at a 9.5% annualized rate, reaching $2.5 billion by 2028 according to forecasts, a trajectory that could justify the current valuation premium.

The Nasdaq-100 inclusion, effective December 22, 2025 according to reports, further amplifies Seagate's visibility. Index inclusion typically attracts passive and active fund flows, potentially boosting liquidity and share price. However, the company must maintain its earnings cadence to avoid a re-rating if growth slows.

AI Storage Demand: A $66.5 Billion Opportunity by 2028

The AI storage market is forecasted to grow at a blistering 24.5% CAGR from 2025 to 2028, reaching $66.5 billion. Seagate is well-positioned to capitalize on this trend, with its 4+ terabyte-per-disk HAMR technology addressing the high-capacity, low-latency needs of AI/ML workloads according to market analysis. By early 2026, the company plans to expand its cloud partnerships, further solidifying its role in the AI ecosystem according to company guidance.

Broader industry trends also favor Seagate. The global enterprise storage market, including AI-driven solutions, is projected to grow at 6.9% CAGR through 2028, driven by big data analytics and hybrid cloud adoption. North America, in particular, is expected to lead with a 25.1% CAGR, aligning with Seagate's geographic and client focus.

Risks and Competitive Pressures

Despite its strengths, Seagate faces headwinds. High debt levels and margin pressures from price competition with Western Digital and Pure Storage (PSTG) could constrain profitability according to analysts. Pure Storage, for instance, trades at a 169.14 P/E ratio according to market data, reflecting investor bets on its cloud-native solutions, though its valuation appears speculative. Seagate's ability to differentiate via HAMR and AI-optimized storage will be critical to maintaining its edge.

Conclusion: A Buy, But With Caution

Seagate's inclusion in the Nasdaq-100 and its AI-driven earnings surge have justified a valuation premium, but the stock's 9.9% undervaluation relative to fair value and strong industry tailwinds suggest it remains a buy for investors with a medium-term horizon. The company's leadership in high-capacity storage, coupled with a $66.5 billion AI market opportunity according to market research, provides a robust growth narrative. However, risks such as debt management and competitive dynamics warrant close monitoring. For those comfortable with the sector's cyclical nature, Seagate offers a compelling blend of growth and value.