Western Digital(US:WDC) Tai Mei Ti A P P·2026-02-10 11:19Core Insights - The mechanical hard drive (HDD) industry is experiencing a shortage due to the surge in demand driven by AI model infrastructure, leading to a significant price increase in HDD contracts, with a 4% rise expected after Q4 2025, marking the largest increase in eight quarters [2][3]. Industry Overview - HDDs are favored for their economic efficiency and long-term data storage capabilities, making them suitable for massive data storage needs, particularly in AI data preprocessing and inference stages [3][4]. - The demand for HDDs is being driven by cloud service providers and large-scale data centers in the US and China, which are investing heavily in AI [3][4]. Company Performance - Western Digital reported a revenue of $3.02 billion for Q2 2026, a 25% year-over-year increase, with expectations of a 40% growth in the next quarter. The company has sold out its production capacity for 2026 and signed long-term contracts with three major clients [4][6]. - The company has rebranded from Western Digital to WD, focusing on HDD technology innovations to capture opportunities in the AI era [6]. Product Innovations - WD is launching a 40TB UltraSMR ePMR HDD and aims to achieve a 100TB capacity using HAMR technology by 2029, employing both ePMR and HAMR technologies to provide diverse options for clients [6][7]. - The company is enhancing performance with High Bandwidth Drive Technology and Dual Pivot Technology, aiming for a 2x bandwidth increase and 2x sequential I/O performance gain, while also introducing energy-efficient HDDs that reduce power consumption by 20% [6][7]. Market Dynamics - The demand for HDDs is not solely driven by AI; cloud-native applications, social media content, and longer data retention times are also contributing to the growth in HDD demand [12][13]. - The evolving storage needs in the AI era include faster data consumption rates and the introduction of data curation processes to ensure data quality, which are reshaping product roadmaps in the HDD industry [9][11]. Customer Insights - Customers are increasingly seeking reliable, low-energy, and high-capacity HDDs, regardless of the pace of GPU cluster construction, indicating a consistent demand across both US and Chinese markets [8][13]. - WD is addressing customer needs by simplifying software integration for HDD advantages, allowing clients to utilize HDD capabilities with minimal adjustments [6][9].