The surge in the demand for artificial intelligence across many industries is also increasing the need to store data, and that’s where Western Digital (NASDAQ: WDC) comes in.
A manufacturer of high-capacity hard disk drives, Western Digital’s stock is sometimes overlooked by investors who prefer chipmakers like Nvidia (NASDAQ: NVDA) whose stock is, of course, very popular.
But Western Digital’s stock turned out to be the highest performer in the S&P 500 in 2025 as its shares increased by a massive 282%.
Artificial intelligence data models use storage
One reason why Western Digital, whose shares over the past six months shot up by 183%, has benefited from the rise in AI infrastructure is that the technology requires the use of older data to help create more AI models.
The “use of AI tools is triggering a surge in creation of new content,” wrote Asiya Merchant, a Citi analyst. “Data that was previously discarded is now retained and for a longer duration under the assumption it may fuel future AI models.”
Data centers require more storage space to maintain all the data from the past, which in turn means a greater need for hard disk drives, known as HDDs in the industry.
Citi increased its price target to $200 a share from $180 and reiterated its buy rating on Western Digital.
Demand for Western Digital’s enterprise-scale HDDs, which are the ones that data centers purchase, is increasing at a “20% compounded annual clip through 2029,” wrote Merchant.
Another factor that will add to Western Digital’s profit margin is that it can also increase prices for its hard drives, she said.
The company reported revenue of $2.82 billion, up 27% year over year, during its fiscal first quarter earnings, on net income of $1.15 billion, an increase of 674% year over year.
Western Digital, which has a current market cap of $63.5 billion, will have to compete with Seagate Technology (NASDAQ: STX), which is only smaller by a fraction with a market cap of $62.5 billion. Its other rivals include flash-based solid-state drive companies such as Pure Storage (NASDAQ: PSTG) and SanDisk (NASDAQ: SNDK).
Western Digital can fend off its flash memory peers since storing data via hard disk drives is less expensive for data center storage companies, Merchant added.
“We did not get the impression that these flash-based solutions coming to market today are necessarily being positioned as direct [hard disk drive] replacements,” she wrote.
Demand for the use of AI remains “insatiable,” wrote Eric Compton, a director of equity research for technology for Morningstar.
“We expect overall HDD industry revenue will grow at a low to mid-teens average rate over the next several years, as prices fall but the amount of storage shipped increases,” he said. “We believe the current shift to data center-led demand and further concentration with the top two players could help structurally stabilize the industry. We believe this could lead to more predictable demand and more discipline from the HDD makers, granting Western Digital a marginal improvement in pricing power and margins.”
As AI models become more sophisticated and are able to complete more complex tasks, the need for greater storage will only rise as more industries deploy the technology to create more efficiency and reach their goals faster. Western Digital will likely benefit from the higher use of AI and its need for large amounts of data.
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