We recently published a list of 11 Best Data Storage Stocks to Invest in According to Analysts. In this article, we are going to take a look at where Western Digital Corporation (NASDAQ:WDC) stands against other best data storage stocks to invest in according to analysts.
Data storage is defined as the organized preservation of digital information, which is vital for today’s computing and businesses. It ensures that data, which includes text, images, and videos, remains accessible and secure for future use. This involves storage systems that range from direct attached storage to cloud solutions. Each of these offers different levels of scalability and accessibility. Fortune Business Insights reported that the global data storage market was valued at $218.33 billion in 2024. It’s projected to reach $774.00 billion by 2032 at a 17.2% CAGR. This growth is expected to be driven by the increasing need for data storage solutions due to the rise of big data.
The data storage industry is undergoing a transformation that is primarily driven by the explosive growth of AI workloads. As the global data volume surges towards a projected 181 zettabytes by 2025, AI demands high levels of storage capacity and performance, according to Avnet Integrated Solutions. AI applications are generating and processing massive datasets. The median size of AI training datasets has seen exponential growth with immense storage requirements. This is fueled by AI-generated content and real-time analytics, both demanding rapid data access and processing.
This surge in data necessitates high-performance storage solutions, which pushes the industry towards SSD dominance. The speed and efficiency of SSDs make them ideal for AI’s demanding requirements. Key advancements in SSD technology, such as 3D NAND and QLC NAND, are driving increased storage densities and improved performance. Emerging standards like EDSFF E3 and PCIe Gen 6 are optimizing SSDs for AI server and data center applications, with a focus on performance, efficiency, and the growing field of Edge AI. While SSDs are gaining prominence for active AI processing, HDDs remain relevant for cost-effective, large-scale storage of archived data. Their cost per gigabyte makes them suitable for data archiving, backup, data lakes, and surveillance applications. Technological advancements like HAMR and MAMR are increasing HDD capacities.
SSD prices are expected to decline as production scales and technology improves, while HDD pricing faces potential plateaus due to the maturity of the technology and increased manufacturing costs. The rise of AI is undeniably accelerating the transition towards SSD-dominated storage solutions. While HDDs retain their value for specific applications, SSDs’ performance and efficiency make them the preferred choice for handling AI’s immense data demands. The data storage industry must adapt to this evolving landscape and prioritize high-performance storage solutions to support the ever-growing needs of AI applications.
Our Methodology
We sifted through ETFs and financial media reports to compile a list of the top data storage stocks. We then selected the 11 stocks with high analysts’ upside potential, at least 15%, as of March 28 and that were also the most popular among elite hedge funds. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A data center filled with racks of hard disk drives and solid state drives.
Western Digital Corporation (NASDAQ:WDC)
Average Upside Potential as of March 28: 57.44%
Number of Hedge Fund Holders: 85
Western Digital Corporation (NASDAQ:WDC) delivers data storage devices and solutions that span from HDDs and SSDs for client, enterprise, and consumer markets. Its product range addresses the storage needs of PCs, mobile devices, data centers, and various consumer electronics. The company caters to the evolving demands of digital data storage.
The company’s HDD segment achieved a 12-quarter revenue high of $2.4 billion in FQ2 2o25, which was up 76% year-over-year. This growth is fueled by the demand for high-capacity enterprise drives, particularly those utilizing UltraSMR technology. The company shipped a record 154 exabytes of nearline storage, with an average price per unit of $172.
The company’s data center revenue hit an all-time high in FQ2 due to cloud demand, which represented 55% of the company’s total revenue. Western Digital Corp. (NASDAQ:WDC) is focused on the continued adoption of UltraSMR technology and the ramp-up of new drives. For the FQ3, the company expects HDD revenue to decline sequentially by a mid-to-high single-digit percentage, but gross margins to improve by 0.5%.
Parnassus Mid Cap Fund stated the following regarding Western Digital Corp. (NASDAQ:WDC) in its Q2 2024 investor letter:
“We re-initiated a position in Western Digital Corporation (NASDAQ:WDC), a manufacturer of memory semiconductor chips and hard disk drives, as we believe earnings expectations are far too low. Semiconductors have been another of our most-alpha-generative industries, thanks to the industry’s secular tailwinds and our in-house expertise. Western Digital stands to benefit from the rapid growth of memory-hungry AI applications. The valuation for Western Digital was low relative to its peers, giving us a way to participate in AI at a reasonable valuation.”
Overall, WDC ranks 5th on our list of best data storage stocks to invest in according to analysts. While we acknowledge the growth potential of WDC, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WDC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
