Western Digital Surges 195% in 6 Months: What Should Investors Do Now?

Western Digital Corporation’s WDC shares have skyrocketed 194.6% over the past 6 months, outpacing the 65.5% return in the Zacks Computer-Storage Devices industry. The stock has also outperformed the Zacks Computer & Technology sector, as well as the S&P 500’s growth of 22.1% and 16.6%, respectively. Cloud providers and AI infrastructure builders need massive, cost-efficient storage. Western Digital’s high-capacity HDDs are direct beneficiaries of booming AI-driven data-center demand, with management attributing recent strength to this trend, along with better-than-expected results and strong capital returns.Image Source: Zacks Investment ResearchWDC has outgrown its peers from the storage industry, like Super Micro Computer SMCI and Teradata TDC, with TDC climbing 34.9% and SMCI falling 29% during the same interval. The company has also outpaced its long-time rival in the HDD market, Seagate Technology Holdings plc STX, which surged 119.3% in 6 months.Seagate is a leading provider of data storage technology and infrastructure solutions, with HDDs, also known as disk drives or hard drives, serving as its primary product offering. Super Micro Computer designs, develops, and manufactures server and storage systems optimized for data centers, cloud computing, AI and edge computing workloads. Teradata offers an open, connected hybrid cloud analytics and AI data platform, Teradata Vantage, that helps enterprises solve complex business problems at scale with harmonized data, trusted AI and faster innovation.WDC has a 52-week high of $188.77. Following a strong rally, investors may wonder if WDC still holds meaningful upside or if expectations have outpaced fundamentals. Let’s unpack what’s behind the rally, the case for and against buying now, and a practical way to think about risk and position sizing.AI Demand Fuels WDC’s Long-Term Agreements & Capacity RampRapid AI adoption is driving strong demand for high-capacity storage, leading to record shipments, expanding margins, and long-term customer commitments. Supported by ongoing ePMR and HAMR innovation and a growing order pipeline extending through 2027, the company expects to sustain solid revenue growth, enhance operational efficiency, and support shareholder returns while managing capacity and broader macroeconomic risks. As agentic AI and multimodal LLMs scale across industries, AI use cases are rapidly expanding, increasing demand for data infrastructure.AI both consumes and produces vast amounts of data, transforming how information is created, stored, and monetized. HDDs remain the most reliable, scalable, and cost-effective solution for storing the increasing zettabytes of AI-driven data. In this environment, Western Digital continues to be a key part of the world’s data infrastructure, offering exceptional value for mass storage needs. As it provides cutting-edge HDD technology to its customers, it remains committed to innovation, focusing on delivering drives with the highest capacity, better performance, improved energy efficiency, and the lowest total cost of ownership.WDC is also applying AI across its operations to boost efficiency and accelerate innovation. AI is modernizing firmware development, speeding up feature releases, and increasing factory productivity by up to 10% through better yield management, defect detection, test optimization, and faster issue diagnostics. AI is improving efficiency across corporate functions, while rising AI- and data-intensive workloads at hyperscalers are driving strong demand for Western Digital’s storage solutions. Customers are increasingly shifting to higher-capacity drives, with shipments of ePMR products continuing to ramp, backed by investments in advanced media technologies, higher areal density, and expanded manufacturing capacity through automation, AI tools and enhanced testing.AI-driven data growth is boosting demand for higher-capacity storage, prompting customers to provide greater long-term visibility through multi-year purchase commitments that strengthen partnerships and support future growth. These commitments underscore the importance of Western Digital’s products in the AI data ecosystem and confidence in its roadmap, including the transition to HAMR, with customer qualifications set to begin in 2026 ahead of volume production in 2027. Also, it will start qualifying next-generation ePMR drives in early 2026, leveraging a proven, scalable platform. Together, ePMR and HAMR position WDC to meet rising exabyte-scale cloud and AI storage demand.WDC Prioritizes Capital Returns While Investing for GrowthWestern Digital remains committed to returning value to shareholders while continuing to invest strategically in technology and growth opportunities. The recent investment in Qolab positions the company for long-term growth by providing early exposure to emerging quantum computing hardware. Combining Qolab’s superconducting hardware expertise with WDC’s strengths in materials science and nanofabrication, the partnership aims to advance qubit performance and scalability for practical quantum systems. Strategically, it strengthens U.S. technological leadership, fosters local innovation, and aligns with Western Digital’s approach of exploring adjacent technologies, leveraging its core capabilities.Management’s strong demand execution and cost management drove robust free cash flow and margin expansion, generating $672 million in cash from operations in the last reported quarter, up from $34 million a year earlier. During the quarter, the company repurchased 6.4 million shares for $553 million. It paid $39 million in dividends, bringing the total returns since the launch of the fiscal fourth quarter of 2025 capital return program to $785 million. Reinforcing its commitment to shareholders, the board approved a 25% increase in the quarterly dividend to 12.5 cents per share, highlighting a balance between innovation-led growth and disciplined financial management.Image Source: Zacks Investment ResearchHowever, WDC faces near-term risks from macroeconomic volatility, including tariffs and trade tensions, which could impact demand across enterprise, distribution, and retail segments. The AI-driven surge in storage needs adds pressure, as higher-capacity drives increase manufacturing complexity and production times, while a high debt load limits flexibility for acquisitions and growth initiatives.Estimate Revision Trend of WDCWDC’s estimates revisions are on an upward trajectory currently. The Zacks Consensus Estimate for WDC’s earnings for fiscal 2026 has been revised north 15.2% to $7.63 over the past 60 days, while the same for fiscal 2027 has gone up 21.8% to $9.84.Image Source: Zacks Investment ResearchKey Valuation Metric of WDCGoing by the price/earnings ratio, the company’s shares currently trade at 20.51 forward earnings compared with 18.23 for the industry.Image Source: Zacks Investment ResearchBottom LineWestern Digital’s rally is backed by durable AI and data center demand trends, along with sustained revenue growth, margin improvement, and healthy free cash flow. The company also began returning capital through a mix of dividends and buybacks, which amplifies investor enthusiasm. It is actively advancing its HAMR drive qualification with hyperscale customers while continuing to innovate in ePMR technology. These efforts, combined with strategic investments in emerging technologies like quantum computing, aim to sustain long-term growth.For investors, balancing growth potential with macroeconomic and operational risks is key to making an informed decision. Flaunting a Zacks Rank #1 (Strong Buy) at present, WDC seems to be worth considering now. You can see the complete list of today’s Zacks #1 Rank stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Western Digital Corporation (WDC): Free Stock Analysis Report Seagate Technology Holdings PLC (STX): Free Stock Analysis Report Teradata Corporation (TDC): Free Stock Analysis Report Super Micro Computer, Inc. (SMCI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks