AI is creating a storage problem besides the much-discussed GPU shortage. Training and inference workloads generate enormous volumes of data, while AI factories require infrastructure capable of moving, managing, protecting and accessing that data efficiently. This creates an interesting comparison between Seagate Technology Holdings plc (STX Quick QuoteSTX - Free Report) and NetApp, Inc. (NTAP Quick QuoteNTAP - Free Report) . Both companies are well-positioned to benefit from AI-driven storage demand, but they participate in different parts of the storage ecosystem.

Seagate is primarily a mass-capacity storage hardware company, particularly through high-capacity hard drives and its HAMR-based Mozaic platform. NetApp is increasingly an enterprise data infrastructure and AI data-management story, combining storage hardware, software, cloud services and AI-focused infrastructure.

So, when the choice boils down to these two stocks, investors should look at how their business models, AI exposure, financial performance and valuations differ.

The Case for NTAP Stock

NetApp is benefiting from AI-led modernization and broad-based demand, prompting higher full-year revenue and EPS guidance. Investments in AI, cloud storage and VMware-related recovery capabilities, supported by the DataPelago and JetStream acquisitions, are strengthening its growth prospects. Diversified demand across customers and geographies, along with faster pricing actions and tighter supply planning, is helping the company meet rising demand. NetApp reported $2.03 billion of revenue, up 30% year over year in first-quarter fiscal 2027. It subsequently raised its fiscal 2027 guidance to $7.98-$8.23 billion of revenue and $9.73-$10.03 of non-GAAP EPS.

NetApp is aggressively building an AI infrastructure platform through acquisitions. In July, it acquired DataPelago, an AI data infrastructure company focused on GPU-accelerated data processing. The objective is to make enterprise data easier to discover, govern and activate for AI and analytics workloads. Recently, NetApp announced its intention to acquire PEAK:AIO, whose technology focuses on metadata architecture and parallel file systems for large-scale AI workloads.

NetApp’s product portfolio is well-positioned for AI-driven workloads, with all-flash arrays supporting high-performance AI pipelines, GPU workloads and cyber resilience. Its cloud storage offerings, including Amazon FSx for NetApp ONTAP and Azure NetApp Files, support VMware migrations and IT modernization. Hybrid-flash and secure, scalable storage solutions are also helping the company displace competitors in sensitive infrastructure and analytics. Management expects to broaden use cases through additional AI solutions with hyperscalers, combinations of on-premises data with cloud services and lower-cost block storage offerings. These initiatives can extend NetApp’s role as customers migrate and modernize workloads across hybrid environments.

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NetApp’s model continues to support investment and capital returns as revenue expands. Fiscal 2026 free cash flow was $1.87 billion, and the company returned $1.36 billion through dividends and repurchases. NetApp returned another $302 million to shareholders despite free cash flow declining to $401 million. The company ended the quarter with $3.58 billion in cash and investments against $2.49 billion of gross debt, preserving balance sheet flexibility for investment and returns.

However, NetApp faces several risks, including uneven customer spending and accelerated purchases that could shift revenue between quarters and create near-term volatility. Rising goodwill and intangibles from acquisitions also increase integration risk. Intense competition could pressure pricing, extend sales cycles and require continued investment, while higher component costs and an unfavorable product mix may limit margin expansion.

The Case for STX Stock

AI models require enormous datasets for training, while inference, video, analytics and machine-generated information continue to increase the amount of data that hyperscalers and enterprises must retain. Seagate's fiscal 2026 results demonstrate how strongly this demand has affected its business. Revenue reached $12.2 billion, up 34% year over year, while GAAP net income increased to $3.18 billion from $1.47 billion. Free cash flow reached a record $3.1 billion. Seagate's investment case is closely tied to increasing storage density. Its Mozaic 4+ platform, based on HAMR, supports hard-drive capacities of up to 44TB and has been qualified and deployed with two leading hyperscale cloud providers. Management highlighted that its roadmap could eventually support drives approaching 100TB through higher areal density.

Seagate is further investing in tools and technology to support HAMR ramp-up and product transitions, aiming for stable drive output despite capacity shifts. Strategic investments aim to meet increasing demand for higher-capacity drives and improve manufacturing yields during product transitions. Unstructured data from physical AI applications like robotics and autonomous vehicles is expected to increase storage needs significantly. Tiered storage architectures that combine HDDs, SSDs and memory are critical for AI workloads, expanding HDD relevance beyond data centers and into enterprise markets.

Seagate’s growing HAMR adoption, rising demand for high-capacity storage and expanding opportunities across hyperscalers, neoclouds and enterprises support its long-term growth outlook. Improving margins, disciplined CapEx and lower debt should further strengthen free cash flow and financial flexibility. Continued gains in areal density and capacity, coupled with strong execution on product transitions, could support sustained profitability as data-generation and storage requirements expand. STX has reduced its debt from $5 billion to $2.4 billion, with ongoing share buybacks and CapEx at 4-6% of revenue. Free cash flow is expected to grow as operational efficiencies improve and density increases without significant CapEx hikes.

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However, the risk is that Seagate remains heavily exposed to the cyclical storage-hardware market. Demand, pricing, customer concentration and technology transitions can have dampening effects on results. Seagate faces execution risks as it shifts manufacturing toward successive HAMR generations, with greater factory complexity, longer processing times and potential yield inefficiencies that could weigh on exabyte growth and margins.

Heavy reliance on large cloud customers also exposes the company to spending cycles and customer concentration risks, while tariffs, trade restrictions, foreign exchange volatility and weaker technology spending could further pressure results. Intense competition from Western Digital, SSD providers and other storage vendors, combined with volatile supply chains and macroeconomic uncertainty, adds further pressure to growth and profitability.

Share Price Trajectory for STX & NTAP

Over the past three months, STX has registered a fall of 4.5% while NTAP rose 32.1%.

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Valuation Comparison

Going by the price/earnings ratio, NTAP’s shares currently trade at 23.66 forward earnings, close to 22.36 for STX.

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Seagate needs continued exceptional earnings growth to support its valuation, while NetApp's valuation provides a different risk/reward profile if its AI infrastructure strategy translates into sustained growth.

How Do Zacks Estimates Compare for STX & NTAP?

STX is currently witnessing an uptrend in estimate revisions. Earnings estimates for fiscal 2027 have been revised up 29.7% to $36.09 over the past 60 days, while estimates for fiscal 2028 have risen 17.8% to $58.28.

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The Zacks Consensus Estimate for NTAP’s earnings has also gained upward traction over the past 60 days.

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STX or NTAP: Which Stock Deserves Investors’ Attention Now?

Both are positioned around rising AI-driven data infrastructure demand. Seagate focuses on mass-capacity storage hardware for hyperscale environments, while NetApp provides enterprise storage and intelligent data infrastructure for AI workloads.

Seagate’s growth prospects hinge on continued hyperscale data-center expansion and AI-driven data growth, with rising exabyte demand, higher-capacity HAMR drives and improving margins and free cash flow serving as key drivers. However, investors should watch whether strong AI infrastructure spending can sustain storage demand and whether Seagate can maintain its current elevated margins and earnings growth. NetApp’s opportunity spans enterprise AI, all-flash storage, public cloud, AI data management and GPU-driven infrastructure, supported by the integration of DataPelago and potential PEAK:AIO synergies. The company aims to make its platform more relevant to the AI data pipeline, but acquisitions must translate into meaningful products, customer adoption and financial returns.

NTAP at present sports a Zacks Rank #1 (Strong Buy), while STX has a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank, NTAP seems to be an attractive pick. You can see the complete list of today’s Zacks #1 Rank stocks here.