Key Highlights

● Seagate climbed to around $891.76, recovering from Friday's selloff over Toshiba capacity worries.

● Goldman Sachs named Seagate a top tactical pick; Bernstein called the prior selloff "a storm in a teacup."

● Western Digital rallied even harder, while SanDisk only inched higher.

Seagate Technology rallied on Monday, Oct. 5, recovering from Friday's selloff as several Wall Street firms argued that Toshiba's capacity expansion posed less of a threat than feared.

Back on its feet

Seagate Technology (NASDAQ:STX) climbed sharply on Monday, trading around $891.76 and finishing among the stronger stocks in the S&P 500. It was a quick turnaround after Friday, when hard-drive makers were hit by worries that Toshiba planned to add capacity.

Analysts moved fast to calm those fears. Bernstein described the selloff as "a storm in a teacup" and recommended buying Seagate and Western Digital (NASDAQ:WDC), and Citi and Morgan Stanley took a similar view. Goldman Sachs separately named Seagate a top tactical pick.

The technology gap

The bull case rests on technology. Morgan Stanley said Toshiba "lacks leading-edge capacity and the heat-assisted magnetic recording technology" used in the most advanced drives.

Seagate has been a leader in heat-assisted magnetic recording, or HAMR, which uses a tiny laser to heat a spot on the disk so more data can be squeezed onto each platter. Those ultra-high-capacity drives are what big cloud and AI data centres buy to store vast amounts of information at low cost per terabyte.

The argument from the Brokers is that extra capacity from a rival without that technology does not compete head-on with the newest products, so the risk to pricing is limited.

Western Digital led, SanDisk lagged

Western Digital rallied even harder than Seagate, trading around $442.44. SanDisk (NASDAQ:SNDK), a flash-memory company, only inched higher, which underlined that Monday's move was about hard drives specifically.

Across semiconductors and hardware, the picture was mixed. Nvidia (NASDAQ:NVDA) closed at a record, and Taiwan Semiconductor's (NYSE:TSM) US shares climbed after Elon Musk confirmed early talks about TSMC joining his Terafab chip venture. "Just discussions, but something may come of it," Musk said. Intel (NASDAQ:INTC) fell on concern it could lose its exclusive role in that project.

A record-setting Nasdaq

Seagate's bounce came alongside records for tech indexes. The Nasdaq Composite rose 286.45 points to close at a record 27,477.31, and the Nasdaq-100 set a record at 31,076.44. The S&P 500 gained 51.23 points to 7,773.95, just shy of its summer record, while the Dow Jones Industrial Average added 90.94 points to 51,267.90.

Long-term borrowing costs kept climbing, with the 10-year Treasury Yield reaching its highest close since 2002. The ISM services report showed prices paid at the highest since July 2022. But Friday's soft jobs data, showing only 29,000 positions added in September, cut the odds of another Fed rate hike in October to roughly one in four or less, down from better than even a week earlier.

B. Riley Wealth's Art Hogan said investors were looking for good news: "With the economic data calendar being light and Earnings about a week away, investors are really groping for anything positive to glom onto, and clearly they're looking at lower energy prices."

Oil did ease, with Brent settling at $100.32 a barrel.

What to watch

For Seagate, the next major moment is its quarterly earnings report, where investors will want to hear about Demand from data-centre customers and progress on its highest-capacity drives. Further detail on Toshiba's expansion could again test the stock.

For the broader market, minutes from the Fed's September meeting are due on Wednesday, Oct. 7, at 2 p.m. ET. PepsiCo reports Thursday and Delta Air Lines Friday. Bank earnings start on Oct. 13, and the Fed's next meeting is Oct. 27–28.