Shares of Western Digital (NASDAQ: WDC) were down 11.7% by early Friday afternoon in New York, and the damage came from a rival's expansion plans rather than any misstep of its own. Reports from Nikkei say Toshiba plans to spend $400 million on capital investment to double its hard-disk-drive production capacity by fiscal 2027, with the spending centered on its factories in the Philippines.

The target is the fast-growing market for hard-disk storage that supports artificial intelligence services — the same demand wave investors have been pricing into Western Digital and Seagate Technology. Only three firms dominate worldwide hard-disk sales: Western Digital and Seagate each account for over two-fifths of shipments, while third-ranked Toshiba holds about 17%.

That is the math spooking the market. Doubling its output could lift Toshiba toward a 30% share, potentially vaulting it past Seagate into second place — with the lost share most likely coming out of the two leaders. Beyond bragging rights, the deeper fear is pricing: Toshiba will need to fill all that new capacity, and discounting Western Digital and Seagate would be the obvious way to do it. If price cuts spread across the industry, margins would tighten — jeopardizing the 68% annual earnings-growth pace currently projected for Western Digital.

There is a counterpoint. At under 18 times earnings, Western Digital already trades with a significant margin of safety, which argues the sell-off may be an overreaction to a plan that is still years away from full effect.

Why it matters

Storage demand is surging as AI data centers scale, and Toshiba is deliberately chasing the same tailwind Western Digital investors are counting on. The HDD oligopoly rarely sees this kind of aggressive capacity move from its smallest player — if Toshiba follows through, it could reset the pricing structure of the entire segment.

What to watch

  • Confirmation and timeline details from Toshiba on the reported $400 million plan
  • Whether Western Digital or Seagate respond with pricing moves in coming quarters
  • AI data-center storage data, especially the HDD versus SSD mix
  • Western Digital's next earnings call for commentary on margin pressure

MarketRadar take

Near-term bearish for Western Digital: capacity-doubling fears from a direct rival are a genuine margin threat in a three-player market, and investors will likely keep selling first and asking questions later. But the demand driver behind both companies' plans — AI storage — is intact, and a sub-18x multiple leaves room for the panic to fade once pricing data, not headlines, sets the tone.