Western Digital CEO on AI Storage Demand and HDD Future

In a recent appearance on Bloomberg Tech, Western Digital CEO Irving Tan discussed the burgeoning demand for hard disk drives (HDDs) driven by artificial intelligence workloads. Despite some recent market pressure on the company's stock, Tan expressed strong confidence in the underlying fundamentals of the HDD market and Western Digital's position within it.

AI's Insatiable Appetite for Storage

Tan highlighted that while memory technologies like NAND and DRAM are constantly being recycled for different computational tasks, the data generated by AI continues to accumulate. This ongoing data creation is the primary driver behind the robust demand for storage solutions. He projected a compound annual growth rate of over 25% for demand over the next five years, underscoring the critical role HDDs play in the AI infrastructure stack.

"The data that's being generated continues to be stored; it isn't getting deleted," Tan explained. "So the amount of data storage requirements is just compounding over time, which puts a lot more demand on our products on an ongoing basis."

The full discussion can be found on Bloomberg Podcast's YouTube channel.

Technological Advancement Over Unit Expansion

Addressing the challenge of meeting this escalating demand, Tan stated that Western Digital is not focusing on increasing the number of drives produced. Instead, the company's strategy centers on technological innovation to boost storage density. Western Digital is currently shipping 32TB drives and is set to introduce 40TB drives this quarter. This represents a significant capacity increase without requiring additional unit production.

"We're not investing in increasing the number of drive units we're producing. We continue to invest in technology to increase the amount of hits and media that we produce because that's the big driver of capacity in a drive," Tan elaborated.

Navigating Long-Term Contracts

The conversation also touched upon the complexities of long-term agreements (LTAs) with hyperscalers and cloud providers, with contracts extending to 2029, 2030, and 2031. Tan acknowledged the challenge of pricing these future commitments but emphasized that customers are actively seeking to secure supply due to their long-term visibility into storage needs.

"Customers are coming to us to put LTAs in place to support demand for 2029, 2030, and 2031," Tan said. "They have really good visibility in terms of the storage requirements that they need because they're looking at the entire AI infrastructure stack... and they realize they have to take a much longer term time horizon in terms of how they plan." He indicated that while supply commitments are being locked in, the commercial terms, including pricing structures, are still under negotiation, potentially involving base prices for a percentage of volume with tiered pricing for increased capacity.

The Resurgence of HDDs

Tan expressed excitement about the renewed focus on HDDs, noting that the technology, often considered a legacy solution, is proving to be a fundamental part of AI infrastructure. He reiterated that 80% of all storage in the cloud and AI applications continues to reside on HDDs, both currently and in the foreseeable future.

"It's really exciting. I mean, people thought that hard drives were a thing of the past, but it's shown to be a fundamental piece of the AI infrastructure stack," Tan stated. He described the opportunity as a "once in a lifetime opportunity that AI is creating" and highlighted the responsibility his team feels to deliver for the industry.