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Summit analysts said the company’s AI investment and HAMR-based HDD transition could result in lower unit demand.
The analysts noted that amidst lingering concerns about the currently muted cloud capex and the continued PC TAM decline, they believe STX should experience a demand recovery sometime in 2024.
However, “while we believe generative AI will be positive for the storage industry in the longer term, we expect the current cloud AI investment to hurt cloud storage spending,” they wrote.
“Additionally, we are cautious about the transition to HAMR-based HDD,” they added. “We believe the HAMR technology transition will result in depressed cloud HDD unit volume as HAMR allows the acceleration of HDD capacity growth that could outpace cloud storage demand.”
The firm understands STX is raising prices to compensate for the lower volumes, but they remain concerned about the company losing its economies of scale in its factories’ footprint, “which would result in continued gross margin headwinds.”
