Western Digital

Thesis

• The business: a pure-play vertically integrated HDD maker selling bulk cloud capacity in a three-player market.
• Earnings drivers: Cloud storage demand. Rising unit price. Lower unit cost from areal density.
• Barriers:
  • Three makers since 2013,
  • in-house head and media nanofabrication,
  • multi-quarter hyperscaler qualification,
  • the scale needed to fund density gains.
  • net cash, investment grade balance sheet.
• Risks:
  • HAMR execution.
  • Customer concentration. LTAs cap upside.
  • Capacity glut: Component suppliers adding capacity make unit additions easier for any of the three makers.
• Downside mechanism: AI capex pause, plus a lagging HAMR ramp and cheaper NAND, handing pricing power back to the three customers (44% of revenue).

Reports

• WDC Business Overview