Introduction
As the founder of two Fortune-500 hard disk drive (HDD) companies, Finis Conner has watched HDDs operate like commodities for decades—but the AI boom changes everything. This article explores Conner’s perspective that “the role of HDDs in AI is as fundamental as batteries are to EVs,” and this creates an enormous opportunity for HDD firms to claim their strategic value as innovators for the new era of AI.
“When demand for storage exceeds the supply, HDD orders go on allocation—meaning the available supply of HDDs is distributed based on priority or existing contracts. Orders are also made further into the future. This scarcity of drives causes prices to go up, but historically, the effect is temporary. Soon enough, HDD manufacturers increase production, the available supply rises—and prices and profits settle back down again.”
Why Are HDD Stocks Booming?
The reason HDD stocks are booming is primarily because of the AI industry’s insatiable demand for quality, up-to-the-minute data—and therefore, a place to store it. On the one hand, AI needs as much data as possible to train more powerful, efficient, and accurate algorithms.
With more and better data, these algorithms can see further and more clearly into the future, while automating better work output. On the other hand, generative AI systems are creating mountains of data too.
“Every electric vehicle needs energy. Therefore, it needs a battery to store that energy. Just the same, every AI needs data for training purposes, and it also needs data to analyze and generate quality output—not to mention the large amounts of data AI generates. Whether it’s a cloud data center or an on-site server, this data needs to take up space on a physical HDD somewhere in the world. Without those HDDs, and a continual supply of them, you can’t have AI.”
COVID Has Made the Present HDD Supply Shock Even Stronger
The last major disk drive supply shock happened during the 2011 floods in Thailand, which was home to at least 40% of the world’s HDD manufacturing plants at the time. It was a disaster that disrupted drive production, causing temporary shortages and short-term price increases.
However, unlike the last on-allocation cycle, this HDD bull run has different factors in the mix. Pandemic-related slowdowns forced the top three HDD manufacturers—and many parts vendors—to scale back production and close down manufacturing facilities. This has reduced the availability and outflow of drives.
Access to HDDs Is a Strategic Necessity for AI Industry Firms
The above-referenced trends reveal that hard disk drives have strategic importance for the entire tech industry, especially the AI field. For example, when examining the market caps of the six leading AI sector firms, the strategic value of having access to HDDs becomes clear.
“With only three suppliers of HDDs for the world—and with the rapid growth of data due to AI and therefore the need for more HDDs—the HDD industry has finally elevated from the status of a commodity to become a strategic component.”
The Global Datasphere Is Growing to 175 ZB by 2025
Here, it’s important to circle back to the above-referenced research from IDC, which is key to understanding just how much AI and related Internet of Things (IoT) use cases need storage. According to IDC:
“The summation of all [data being stored], whether it is created, captured, or replicated, is called the Global Datasphere, and it is experiencing tremendous growth. IDC predicts that the Global Datasphere will grow from 33 Zettabytes (ZB) in 2018 to 175 ZB by 2025.” (Paraphrased in brackets for clarity)
How HDD Manufacturers Can Seize the Opportunity
Due to (1) AI’s increasing need for storage, (2) the massive increase in the Global Datasphere (from 33ZB to 175ZB by 2025), (3) the continuing supply chain disruptions, and (4) increasing geopolitical instability that could further disrupt technology and manufacturing supply chains, Conner says that the higher profits and revenue of HDD firms at this time could be used to catch a long-term wave of growth.
“If HDD manufacturers strategically position themselves in today’s marketplace as absolutely essential to solving critical pain points for the new AI economy, they could seize a generational opportunity to differentiate themselves in a radically transforming marketplace.
The HDD AI Innovation Trend Is Already Taking Root
Among the top three HDD manufacturers, the trend of providing solutions for AI is already taking root. Here’s what the top three firms have recently announced:
Seagate
The Mozaic 3+ platform by Seagate is designed to meet AI’s increasing storage demands. With its new Heat-Assisted Magnetic Recording (HAMR) technology, Mozaic 3+ is surpassing previous limitations on storage density, allowing data centers to double their capacity without expanding their physical footprint, while also saving on energy costs.
Toshiba
Toshiba is addressing the needs of AI systems by leveraging new recording technologies—such as Flux-Controlled Microwave-Assisted Magnetic Recording (FC-MAMR) and Microwave Assisted Switching Microwave-Assisted Magnetic Recording (MAS-MAMR). These enable Toshiba to significantly boost recording densities, ensuring high performance and reliability for AI systems.
Western Digital
Western Digital (WD) is addressing AI’s increasing storage demands through its AI Data Cycle framework, which helps customers plan and develop advanced storage infrastructures that maximize AI investments, improve efficiency, and reduce total costs. By strategically aligning its flash and HDD product roadmaps with the storage requirements of each stage in the AI data cycle, WD hopes to provide solutions that support high-performance and scalable AI workloads.
Conclusion
In conclusion, Conner says he hopes to see the following for the HDD industry in the coming years:
“With the introduction of AI, we’re in a pivotal time where AI is providing new and powerful solutions that are reshaping the world and the global economy. We know that these AI solutions will require faster access to increasing quantities of data, and they will be generating increasing amounts of new data too.
The HDD manufacturers that succeed in providing higher storage capacity and higher speeds to fuel and enable the growth of AI may be able to continue riding the ongoing allocation wave to serve deeper and more important waters in the years ahead. These firms will be doing a great deal more than providing essential commodities. They’ll be innovators, and they will be solving critical problems to enable the expansion and value of AI capabilities.”
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