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

Seagate is in a bidding contest with Toshiba to acquire the TDK Corp. business producing magnetic heads for hard-disk drives, according to Bloomberg on Tuesday, which cited people familiar with the matter.

Seagate declined to comment on the report and Toshiba didn’t immediately respond to a requests for comment early Tuesday.

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

Seagate stock was down 7.1% in early trading Tuesday. Western Digital shares were falling 6.6%. TDK shares rose 5.3% in local trading in Japan.

Even if Seagate ends up making the superior offer, it might find it difficult to get an acquisition past regulators.

“Seagate would simply never get antitrust approval for such an acquisition (unless TDK or Toshiba was on the verge of default) as it would make the third HDD vendor solely reliant on Seagate technology, a result that we believe Toshiba, large HDD customers, and Japan would all view as untenable,” wrote Wedbush analyst Matt Bryson in a research note.

The HDD business is booming as artificial intelligence both requires and creates huge amounts of data. Seagate stock and Western Digital have soared this year.

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