Seagate Technology (STX): Steven Cohen’s Bet on the Data Storage Giant with AI-Driven Growth

Steven Cohen’s Point72 Asset Management has quietly positioned itself as a believer in Seagate Technology (STX), with the firm’s Q4 2024 13F filings revealing a 50% surge in shares to 1.8 million, valuing the stake at $158 million. This move underscores Cohen’s growing confidence in the data storage leader as it navigates a world hungry for cheaper, scalable storage solutions. Here’s why STX could be a winning play for investors.

The Investment Thesis: STX as the “AI Infrastructure Play”

Seagate’s core business—selling hard disk drives (HDDs)—might seem outdated in an era of flash storage dominance. But the company is redefining its role in the data economy through HAMR (Heat-Assisted Magnetic Recording) technology, which enables ultra-high-capacity drives (up to 28TB and beyond). These drives are critical for AI training, cloud storage, and big data analytics, where cost efficiency is paramount.

The financials back this narrative. In Q1 FY2025 (ended September 2024), Seagate reported:
- Revenue up 49% year-over-year to $2.17 billion, driven by mass capacity HDD sales.
- Non-GAAP EPS of $1.58, the highest in over a decade, fueled by margin expansion to 33.3%.
- A $158 million stock valuation in Cohen’s portfolio, up from near-zero just one quarter earlier.

Why Cohen’s Portfolio Move Matters

Steven Cohen’s addition of STX aligns with two key trends:
1. AI’s Insatiable Appetite for Data Storage: Training AI models requires vast amounts of data stored on cost-effective HDDs. Seagate’s HAMR drives, which offer 6x lower cost per terabyte than NAND flash, are a direct response to this demand.
2. Cloud Infrastructure Growth: Public clouds like AWS and Azure rely on HDDs for 90% of their exabytes stored. Seagate’s 93% share of this market gives it a structural advantage.

The firm’s Q1 earnings call revealed progress in qualifying HAMR drives with major cloud providers, with revenue ramping expected by mid-2025. This aligns with Cohen’s broader focus on AI-enabling infrastructure, a theme also seen in his stakes in NVIDIA and AMD.

Risks and Challenges

• Technology Transition Risks: HAMR production delays or qualification setbacks could slow growth.
• NAND Flash Competition: Lower prices for solid-state drives (SSDs) could erode HDD margins.
• Supply Chain Volatility: Component shortages or geopolitical issues could disrupt manufacturing.

Valuation and Upside Potential

At a market cap of $20.9 billion, STX trades at 12.3x its trailing 12-month earnings, below its five-year average. With HAMR-driven margin expansion and AI tailwinds, a 20% upside to $120 (from its $102 post-earnings price) seems achievable.

Conclusion: STX’s Time in the Spotlight

Steven Cohen’s 50% stake increase in Seagate isn’t just a bet on a mid-cap stock—it’s a bet on the data storage backbone of the AI revolution. With its HAMR technology addressing a $100 billion cloud storage market, Seagate’s growth trajectory could mirror that of semiconductor leaders like NVIDIA.

The data is clear: STX’s Q1 results, strategic tech advancements, and Point72’s confidence make it a compelling play for investors willing to ride the data wave.

Final Take: STX is positioned to dominate the high-capacity storage segment, and Cohen’s move suggests the stock could be just getting started.