Investors are worried that Toshiba will boost its production of a key AI storage product, potentially hurting the strong pricing power that Western Digital and Seagate currently enjoy

Seagate Technology could be threatened by a reportedly planned expansion into HDD manufacturing by Toshiba.

Shares of Western Digital and Seagate Technology are falling early Friday, reflecting concerns about the potential for heightened overseas competition in the market for hard disk drives.

The fears stem from a Nikkei Asia report that Japan's Toshiba plans to double its manufacturing capacity of HDDs for artificial-intelligence applications during its 2027 fiscal year, which runs through March. The report also noted that the company's planned expansion of a Philippines plant would mark its first meaningful investment in hard disk drives in half a decade.

Hard disk drives have become a key component of the AI build-out as they enable the storage of vast amounts of data. Storage and memory components are in short supply, allowing manufacturers to sell their current offerings at high prices and realize strong profitability.

If significant additional supply floods the market, it could cut into the pricing power that major players Western Digital (WDC) and Seagate (STX) currently enjoy.

Toshiba didn't immediately respond to a MarketWatch request for comment.

Western Digital and Seagate shares are down 8% and 10%, respectively, in Friday's premarket action.

-Emily Bary