Seagate Technology Holdings has a Toshiba problem. After Seagate stock was hit by worries that its Japanese rival would increase production capacity, now the two companies are reportedly competing over an acquisition.

Seagate stock was down 1.8% in premarket trading Tuesday. The company is in a bidding contest with Toshiba to acquire TDK Corp. business producing magnetic heads for hard-disk drives, according to Bloomberg on Tuesday, which cited people familiar with the matter.

Seagate and Toshiba didn't immediately respond to requests for comment early Tuesday.

Any deal is likely to be worth several billion dollars, according to Bloomberg. Magnetic heads are important components which enable precise reading and writing of data stored on the surface of a HDD disk. TDK currently supplies HDD magnetic-recording heads to Seagate, Toshiba and Western Digital.

The HDD business is booming as artificial intelligence both requires and creates huge amounts of data. Seagate stock and that of its U.S. peer Western Digital Corp have soared this year so far.

But the rapid share price rise has also left investors nervous. Seagate and Western Digital shares dropped sharply on Monday following a report Toshiba plans to double its production capacity for drives used in AI data centers in fiscal 2027.