We recently published a list of The 7 Best Data Storage Stocks to Buy NowIn this article, we take a look at how Seagate Technology (NASDAQ:STX) compares to other data storage stocks.
The future of data storage
Data storage is the systematic process of archiving digital information to ensure its availability and security for future use. This process involves various storage methods including direct attached storage, storage area networks, network attached storage and software defined storage to store data in multiple formats such as text, images and videos. Storage technologies range from traditional physical devices such as hard drives to cloud-based solutions that offer scalability and access from any location with an internet connection.
According to a report by Fortune Business Insights, the global data storage market was valued at USD 218.33 billion in 2024 and is expected to grow to USD 774.00 billion by 2032, at a compound annual growth rate of 17.1% during the forecast period. North America is the largest data storage market, contributing USD 78.98 billion to the market in 2023. A major factor driving the market growth in the region is the increasing number of data centers. The COVID-19 pandemic has increased the demand for storage and processing power as organizations strive to remain agile and responsive. At the same time, data centers are increasingly relying on cloud providers for their storage and processing needs, which is further fueling the market growth in the region.
Generative AI has also played a key role in the growth of the data storage market, bringing about transformative changes in data creation, processing and storage requirements. Advanced machine learning models such as GPT-3 can produce massive amounts of diverse and complex data. This increase in data generation has necessitated a re-evaluation of storage architectures to accommodate the increased volume, variety and velocity of content generated. Industries such as entertainment, e-commerce, finance, healthcare and manufacturing are all contributing to this increase in data production.
In a May 30 CNBC interview, Pure Storage CEO Charlie Giancarlo discussed current trends and challenges in the data storage industry, focusing specifically on how artificial intelligence (AI) is impacting storage needs. Giancarlo highlighted three key areas where AI is impacting storage: the need for storage to train AI models, using AI models on existing data, and upgrading existing data environments to make them AI-ready. He emphasized that while AI investments may put pressure on other parts of technology budgets, data storage will remain a critical area that will likely continue to see investment.
According to IDC, global storage demand was estimated at 33 billion terabytes in 2018 and this number is expected to reach 175 billion terabytes by 2025. The growing demand for data storage has led to the development of innovative, secure and cost-effective solutions. Cloud storage has become a central element of modern data management. The introduction of big data and IoT is expected to further drive the growth of cloud storage. SSD technology, enhanced by data reduction techniques such as compression and deduplication, helps maximize storage efficiency and is therefore ideal for large-scale data management. Manufacturers are introducing 3D NAND technology in storage devices. NAND is a type of non-volatile memory technology that does not require power. 3D NAND technology involves stacking cells vertically, enabling higher capacity and reliability. While the technology offers significant benefits, such as higher storage density and less interference, it also comes with higher manufacturing costs.
Other emerging technologies such as DNA data storage and object storage are also increasing capacity and reliability. DNA storage technology uses synthesized DNA strands to encode and decode binary data and store up to 215,000 terabytes of data. Although DNA storage is still under development, it could become a viable option for storing critical data in the future. Object storage offers a scalable and cost-effective solution for managing unstructured data by storing data as individual objects. This technology enables quick retrieval and seamless data sharing across multiple platforms. As big data and IoT continue to grow, object storage is becoming increasingly important for organizations that need to manage large amounts of data efficiently. Manufacturing companies are also implementing data security using encryption, blockchain, and AI that protect data and automate threat detection.
As the digital landscape expands, innovative solutions such as cloud storage, SSD optimizations, enhanced data security, AI-driven management, DNA memory, and 3D NAND will play a critical role in meeting the growing demand for data storage solutions. With this in mind, let’s take a look at the 7 best data storage stocks to buy now.
Our methodology
We used cloud computing and data storage ETFs and online rankings to compile an initial list of the best data storage stocks to buy now. We narrowed our list down to the 7 stocks where analysts see the most upside potential. The list is sorted in ascending order of average analyst upside potential (as of August 12). Note: We only included companies whose primary business is in the data storage industry.
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A technician configures a storage drive attached to the network.
Seagate Technology (NASDAQ:STX)
Upside potential: 21.87%
Average analyst price estimate: $117.34
Seagate Technology (NASDAQ:STX) is a global leader in data storage solutions. The company designs and manufactures a wide range of hard disk drives (HDDs), solid-state drives (SSDs), external storage devices, and network attached storage (NAS) drives used in computers, laptops, and mass data centers. The SSD market is valued at $65.47 billion in 2024 and is expected to grow to $147.01 billion by 2029, at a compound annual growth rate of 17.56% (as per Mordor Intelligence estimates). Seagate Technology (NASDAQ:STX) is well positioned for success as the global SSD market grows.
For the three months ended June 28, Seagate Technology (NASDAQ:STX) reported its revenue rose 18% year over year to $1.88 billion, beating analysts’ forecast of $1.85 billion. Profit rose 23% due to higher gross and operating margins. The company reported a gross margin of 31.8%, a significant improvement from 22.7% compared to the same quarter last year. Seagate Technology (NASDAQ:STX) is seeing strong demand in the global cloud market due to the growth of AI-related technologies, particularly generative AI.
Seagate Technology’s (NASDAQ:STX) low-cost and scalable storage solutions are expected to remain in strong demand, further boosting cash generation. The company increased its total cash balance 78% year over year to $1.4 billion from $786 million and reduced its debt to $5.7 billion from $5.8 billion a year ago. Although Seagate Technology’s (NASDAQ:STX) total liabilities still exceed total assets, the company is expected to experience rapid growth due to the cloud and AI sectors.
Also, the company’s next-generation Heat-Assisted Magnetic Recording (HAMR) technology is considered a significant breakthrough in the data storage market. This technology enables higher data density, reduces energy consumption, and increases hard drive capacity. Management believes that the launch of HAMR products in fiscal 2025 could usher in a new spending cycle for customers looking to upgrade. Analysts expect the company to grow its earnings by 136.84% this year. Therefore, Seagate Technology (NASDAQ:STX) offers an attractive investment opportunity. The stock is trading at $96.28 on August 12. Industry analysts are unanimous on the stock’s Buy rating, setting an average price target of $117.34, representing an upside potential of 21.87% from current levels.
Total STX 4th place on our list of the best data storage stocks to buy. While we recognize STX’s potential as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for AI stocks that are more promising than STX but trade at less than 5x earnings, read our report on the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
