Sandisk (SNDK 13.64%) has been the hottest stock in the S&P 500, with an 820% year-to-date gain. That return, plus Micron Technology's (MU 13.08%) recently achieved $1 trillion market cap, makes it easy for investors to forget about Western Digital (WDC 8.45%), another memory stock that is benefiting from the AI build-out.
If you already have Sandisk and Micron shares, Western Digital may be a good addition to consider.
Image source: Getty Images.
Western Digital is deeply integrated in the AI boom
Western Digital specializes in hard disk drives that help AI chips perform at their best. These devices let AI chips store vast amounts of data, which is more important given the high volume of data from AI training and inference.
The company's enterprise hard disk drives were enough to yield 45% year-over-year revenue growth in its fiscal 2026 third quarter. Western Digital also delivered 11% sequential revenue growth. High sequential growth is a common indicator of AI stocks that have more room to run. Sandisk and Micron both posted elevated sequential growth while guiding for additional sequential growth in future quarters. Western Digital did the same.
Fiscal 2026 fourth-quarter revenue is projected to be $3.65 billion, which represents 9.4% sequential growth. Western Digital's hard disk drives are a critical layer of AI infrastructure. Semiconductor chips need them, and as hyperscalers load up on more AI chips, they will have to buy more of Western Digital's hard disk drives.
NASDAQ: WDC
Key Data Points
The bullish thesis mainly boils down to how much you believe in AI
Western Digital has the right product at the right time. Its 333% year-to-date gain may feel pedestrian if you put it next to Sandisk, but that return has outperformed almost every stock in the entire market. Western Digital CEO Irving Tan offered a simple thesis for investors in the Q3 fiscal year 2026 press release.
"Virtually every AI workload, from training, inference, agentic AI to physical AI, creates data that is stored persistently and cost-efficiently on HDDs," Tan said.
Most forecasts suggest that the AI boom still has several years left. Grand View Research pegs a 30.6% compound annual growth rate (CAGR) through 2033, and there are still 809 planned data centers. Each of those data centers will need hard disk drives, and many data center builders will turn to Western Digital due to its reliability.
Western Digital finds itself at the center of these attractive tailwinds. Big tech is posting higher revenue growth rates thanks to AI, which will necessitate increased investments to avoid losing ground. For instance, Alphabet CEO Sundar Pichai told investors in a first-quarter press release that AI was "lighting up every part of the business." That's good news for a company that has established itself as a leading hard disk drive provider.
