Rise of AI, Supply Shortfall Set to Drive Up HDD Prices

Data storage leader Seagate had predicted a growing demand for hard drives, given the exponential and continued growth of data.

That prediction appears to be holding true and is expected to continue to do so. But do not expect hard drives to come cheaply any time soon. In fact, expect them to be costly—very costly.

According to recent reports, including those from Tech Radar, hard drive prices are expected to surge in the coming months due mainly to a mismatch in supply and demand. Analyst firm TrendForce first reported this rising demand for high-capacity HDD (Hard Disk Drive) products, driven by the ongoing Artificial Intelligence (AI) revolution.

While demand is high, supply is apparently not keeping up. Along with this growing demand are reduced production levels from manufacturers, which is leading to a supply-demand imbalance heavily skewed towards the latter. And, with this imbalance, HDD prices are skewing up rather significantly.

Seagate, also a leading hard drive manufacturer, confirmed this trend by announcing in a letter to its customers immediate price increases for its hard drives. Among the reasons it cited for the announced price adjustments are global inflationary pressures (prices of goods, in general, are rising worldwide) and ongoing supply constraints, which the firm anticipates will push prices even higher in the coming months. Western Digital, another industry giant, has echoed Seagate’s sentiments, signalling cost increases for its hard drives in the near future.

Enterprise HDDs are expected to bear the brunt of these price increases, mainly because they are crucial to driving AI forward, playing a pivotal role in the storage and retrieval of large datasets used for training AI models. In particular, vast amounts of training data are often stored on enterprise HDDs, and these data sets are indispensable in training and developing AI models. And with datasets only growing, the need for high-capacity HDDs will grow as well if enterprises are to handle the vast data requirements of AI.

This does not mean consumer HDD models are going to be any cheaper—not anytime soon, at least.

There is a ripple effect to these price increases, and they will likely cascade to consumer models as well. Meaning, consumer hard drives are also likely to see a price hike, as manufacturers are likely to reprioritise their production to cater to the profitable AI market. As a result, the supply of smaller capacity consumer HDD will likely be depressed, leading to a supply shortfall that is expected to drive prices upwards.

This trend is expected to continue at least until next year, with industry sources also saying that the limited supply of higher-capacity hard drives may persist throughout 2024. So far, HDD prices are predicted to climb up by 5–10% in the second quarter of 2024—and it is highly likely that similar hikes will occur moving forward.

This news is certainly bad news for those in the market for new HDDs, whether for enterprise needs or consumer usage. Even Worse, there is potentially no end in sight just yet, as industry insiders believe supply shortfalls will be a continuing problem in the near future. And the continuing boom of AI is only going to make things even more complicated.