AI data centers fuel demand for HDDs as NAND flash approaches decline

As hyperscale data centers continue expanding to support AI training and inference, demand is growing across the entire storage ecosystem. Hard disk drives (HDDs) are becoming an attractive, cost-effective alternative for high-capacity storage in data-intensive AI workloads. Several Japanese HDD manufacturers have responded by quickly expanding production capacity to meet demand.

While AI demand is expected to remain strong, and DRAM market players warn of the most severe shortage yet coming in 2027, the story might play out differently for NAND Flash. In fact, with sales dropping in consumer electronics, the segment may even reach an equilibrium in late 2027.  

AI demand revitalizes the HDD supply chain

Hard disk drives (HDDs) have largely fallen out of favor for high-performance computing and consumer electronics as manufacturers rapidly adopted their faster and more stable cousins, solid-state drives (SSDs). However, with AI data center expansion surging, operators are eager for a cost-effective solution for storing the massive data sets created by AI.  

Right now, HDDs are the cheapest way to store data per gigabyte, making enterprise drives an important piece of the data center storage architecture. With inference across the industry scaling upward, the volume of data that needs to be stored also grows, and with it, HDD demand.  

As such, the AI sector is creating a revitalization in the commercial HDD space. Western Digital, Seagate, and Toshiba have long dominated the niche, and that trio is now racing to get enterprise-grade HDDs with capacities over 40TB in the hands of AI data center customers.

According to TrendForce, Western Digital aims to start mass production of its 40TB-class drives in the second half of this year and ship 100TB drives by 2029. Seagate is already shipping 44TB HAMR drives and has a similar 100TB roadmap. Toshiba is slightly behind with its MAMR approach, which notably delivers cooler performance than HAMR and could be attractive to data center customers. It plans to introduce its own 40TB products in 2027.  

However, there is also a story unfolding upstream as Japanese suppliers are aggressively expanding production capacity to meet future demand.  

Per The Elec, Resonac, the largest supplier of HDD magnetic recording media, is increasing its annual capacity by 31%. HOYA, the world’s only HDD glass substrate supplier, is investing in a new plant in Vietnam scheduled to come online in 2028. TDK has also announced expanded production for HDD magnetic heads and suspensions. Beyond this, billions more yen are being invested in expansion across the HDD supply chain by the likes of JX Advanced Metals, Nitto Denko, and CISFLEX.  

As hyperscale cloud providers continue expanding AI capacity, every layer of the storage ecosystem is becoming strategically important. Investments in one technology category can create ripple effects across multiple adjacent markets.  

Procurement teams must now be aware of not just HDD availability, but also whether upstream components suppliers can keep pace with increasing production. Sourceability’s data-driven market intelligence helps customers proactively track these dependencies, offering visibility into constraints that most forecasts don’t surface.

NAND Flash sees supply outpace demand

Throughout 2026, the NAND Flash market has remained undersupplied, pressured by the same AI-related demand that has pushed every memory category higher. However, TrendForce’s latest market update suggests this shortage may be coming to an end in the latter half of 2027.  

In the immediate future, buyers must still contend with tightness as strong AI demand creates a 4% to 5% supply deficit for the year. But next year, lagging consumer electronics sales may change the picture.  

DRAM expansion has been the top priority for most manufacturers, leaving NAND Flash fab space constrained. Suppliers outside of China are relying primarily on process node migrations and upgrades to meet demand rather than new fab capacity.  

Chinese manufacturers are the exception. They have opted to invest in new fabs, bringing new equipment online fast enough to push their share of global NAND Flash output to nearly 19%.

Over the coming months, AI-related demand will continue to absorb supply as next-gen Intel and AMD platforms roll out and new agentic AI applications are introduced. However, consumer electronics, namely smartphones and PCs, still account for roughly 40% of total NAND Flash sales. This gives them a sizeable influence on the market, particularly as both categories have struggled in 2026.  

TrendForce projects global smartphone production will fall by 15% to 20% year-over-year in 2026 and continue that trajectory in 2027 albeit at a more modest pace. It offers a similar outlook for the PC market, which has seen a roughly 10% decline in shipments in 2026. Next year appears to be another round of contraction as consumers cut back on spending in part due to rising costs.  

All considered, it appears supply tightness for NAND Flash will finally ease in late 2027. It’s a positive sign for a memory market which has absorbed tremendous pressure over the last two years thanks to the AI boom.  

Of course, the NAND market doesn’t exist in a vacuum. AI investment rippling across adjacent storage and memory markets has caused a decline in other areas like consumer electronics. Though this helps the market stabilize faster from a supply-demand perspective, it comes at a cost for manufacturers exposed to less favorable segments. Ultimately, the industry’s goal should be one of equilibrium, not stabilization by hollowing out certain pieces of the market.  

Sourceability provides access to a global supplier network, giving buyers a way to secure shortage-related components and reduce procurement risk while the broader market works toward balance.