The Hard Drive's Revenge

The Data Landfill

The basic story of the AI boom is that it is a glorious, high-tech affair, driven by futuristic chips from Nvidia and god-like models from OpenAI and Anthropic. It is a story of brains. But it turns out that the AI boom is also a story of brawn—of the vast, unglamorous, and utterly essential digital real estate needed to house all that intelligence. In a weird turn of events, the humble, mechanical hard disk drive is making a comeback.

After years of being seen as a low-margin commodity, the industry's two largest players, Western Digital and Seagate, are reporting revenue growth of around 30%. The reason, of course, is AI's voracious, almost insatiable appetite for data storage. Here is The Wall Street Journal on the resurgence:

As long as the AI story stays intact—and most recent signs point to it sustaining for a while—there's little doubt the trajectory for hard drives will keep rising. ... More crucially, perhaps, AI self-generates a lot of data in the form of text, pictures and increasingly video that needs to be stored somewhere. Google said last month that users of its Flow filmmaking tool had created 100 million AI videos in the three months since it launched in May—requiring tons of storage.

The AI boom is creating a demand for storage that is fundamentally different from any previous tech cycle. In past eras, storage was often repurposed. In the AI era, the vast datasets used to train models are invaluable assets to be kept in perpetuity. More importantly, AI is a relentless content-creation machine, generating unfathomable amounts of new data that all needs to be stored somewhere.

This has dramatically shifted the power dynamics in the storage industry. The market for high-capacity hard drives is effectively a duopoly controlled by Western Digital and Seagate. With cloud customers like Amazon and Google desperately needing their products, these two companies now have a level of pricing power they haven't enjoyed in years. They are signing long-term supply deals with baked-in pricing, a practice unheard of when they were mere commodity suppliers.

The whole thing is a fascinating reminder that in any gold rush, the surest bets are often on the unsexy necessities. While investors chase the glamorous AI chipmakers trading at dizzying multiples, the hard drive makers are quietly doubling their profit margins to 40%. Their fortunes are, to be sure, tied to the fate of the AI boom. But they are making a powerful case that in a corner of the tech world about as unsexy as it gets, boring can be bountiful.

The Arms Dealer Picks a Side

The essential job of a platform company, the great arms dealer of a technology war, is to sell its platform to everyone. And yet, last week, Nvidia—the undisputed hardware king of the AI boom—appeared to pick a side in the multi-trillion-dollar race to build autonomous vehicles.

The chip giant has signed a letter of intent for a potential $500 million investment in Wayve, a London-based self-driving startup. Here is Reuters on the deal:

Nvidia has signed a letter of intent for a possible $500 million investment in the next funding round at Britain's Wayve, the autonomous driving technology group said on Thursday. ... Wayve's technology, unlike conventional systems that rely on detailed digital maps and coding, uses machine learning with camera sensors mounted on the vehicles to learn from traffic patterns and driver behaviour.

On a technical level, Wayve's "vision-only" approach is philosophically similar to Tesla's. Both are betting that cameras and a powerful AI brain, not expensive lidar and pre-built maps, are the key to solving self-driving. But their business models are polar opposites, and this is where Nvidia's investment becomes so strategic.

Tesla's model is a closed, vertically integrated ecosystem. It designs its own cars, its own "Full Self-Driving" computer chips, and its own AI software. If an automaker wants Tesla's self-driving technology, it has to buy a Tesla.

Wayve's model is an open, partnership-based platform. It is a pure software and AI company. It doesn't build cars; it partners with existing automakers and ride-hailing services (like Uber) to integrate its AI "driver" into their vehicles, running on powerful, off-the-shelf hardware—namely, Nvidia's chips.

For Nvidia, the Wayve model is a perfect fit. A closed ecosystem like Tesla's, which uses its own custom silicon, is a direct threat to its ambition to sell its automotive chips to every car company in the world. By backing Wayve, Nvidia is helping to create a world-class, ready-made self-driving solution that any automaker can buy. It is a powerful "anti-Tesla" offering for the rest of the industry.

The investment is a deeply strategic move that might reshape the competitive landscape. The race for autonomous vehicles is no longer just about competing technologies; it's about competing business models. And the AI arms dealer has decided it's no longer content to just sell the weapons; it is now actively helping to build one of the armies.

The Scoreboard

• AI: A Tech CEO’s Lonely Fight Against Trump (WSJ)
• Social Media: China's ByteDance will get 1 of 7 board seats for TikTok's US operations, official says (Reuters)
• Regulations: Trump to impose $100,000 fee per year for H-1B visas, in blow to tech (Reuters)
• VC: SoftBank Vision Fund to cut 20% of global workforce (Nikkei Asia)