Two of the biggest beneficiaries of the artificial-intelligence boom got a reality check on Friday. It may present an opportunity for patient investors.

Shares of hard-drive makers Western Digital and Seagate Technology fell sharply after a report from Nikkei that Japanese rival Toshiba plans to double its production capacity for drives used in AI data centers in fiscal 2027.

Toshiba plans to invest about $380 million to add capacity at its production facility in the Philippines, according to the report. The company is trying to grow its market share in hard disk drives, or HDDs, to as much as 30% from around 10% today, the report said. Toshiba declined to comment.

Western Digital stock dropped 10% to $414.29 on Friday. Seagate fell by 10% to $848.99.

Toshiba's reported investment could ease the supply shortage in the industry, which has boosted pricing power and driven record profits for Western Digital and Seagate-two of the hottest stocks in the S&P 500 since mid-2025. AI requires plenty of data storage, and data-center operators would welcome more capacity.

"We don't comment on other companies' plans," a Western Digital spokesperson said. Seagate declined to comment.

Toshiba's big move isn't a death knell for the HDD trade just yet. There are several uncertain steps between Nikkei's report and Western Digital and Seagate losing market share or seeing prices weaken.

To start, Toshiba remains by far the smallest of the three HDD producers. Analysts expect Seagate and Western Digital to make a combined $1.7 billion in capital expenditures in fiscal 2027, which ends next June, per FactSet. And while $380 million isn't nothing, it likely won't be enough to triple Toshiba's market share.

"I want to play on the NY Yankees," Jordan Klein, a tech sector specialist at Mizuho, wrote of Toshiba news in a sales note. "Doesn't mean it is going to happen."

If Toshiba's investment does manage to meaningfully increase supply, prices won't collapse right way. Both Western Digital and Seagate have increased prices more cautiously than their memory-chip peers, such as Micron Technology. That has limited margin expansion in the short term, but it also means less downside if supply catches up to demand.

Similar to the memory names, however, Western Digital and Seagate have prioritized long-term agreements to help lock in pricing terms and give them greater clarity about long-term demand. New capacity from Toshiba may give customers more leverage in those negotiations, but it won't have a substantial impact on deals until 2028, Klein argued.

"My initial take is to buy this news, but I would wait, no immediate rush as this news, while not even confirmed, will linger," he wrote. "No one seems to believe that a [one-year] target by Toshiba is any ways realistic to add that much capacity or see any real share shift."