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The S&P 500 has been on fairly a powerful progress streak in 2025. Regardless of tariff uncertainty spooking the market in April, distinctive synthetic intelligence (AI) spending has lifted the US economic system and helped drive its flagship inventory market index up by double digits.
In truth, even with all of the current volatility, index traders have nonetheless earned a sturdy 15.6% return because the begin of the 12 months, together with dividends. As such, a £7,000 funding at first of January is now price roughly £8,092.
And but some inventory pickers have generated much more explosive features. In truth, Western Digital (NASDAQ:WDC) has greater than tripled, rising by 222.7% leaving extra standard shares like Nvidia within the mud this 12 months!
For the traders who had been good sufficient to identify this progress alternative, their £7,000 is now price over £22,589!
However in fact, the query now turns into, can Western Digital shares do it once more in 2026?
The AI winner everybody ignored
Nvidia’s reaped monumental income by promoting semiconductor chips to energy machine studying fashions. However Western Digital has joined within the gold rush by promoting the answer to the big information storage necessities of those AI fashions.
The group specialises in making laborious disk drives (HDDs) and stable state drives (SSDs) for each customers and enterprises alike. Nevertheless it’s the latter driving the majority of demand proper now.
With the corporate receiving record-breaking order volumes, income for its 2025 fiscal 12 months (ending in June) jumped by a powerful 51%. Nevertheless it was underlying working income that stole the present, rising from $343m to a staggering $2.3bn – a 578% surge.
This momentum has continued into the primary quarter of its 2026 fiscal 12 months, with gross sales up 27% 12 months on 12 months and working income greater than doubling by 110%. With all this momentum in thoughts, it’s no shock that Western Digital shares have skyrocketed in 2025.
Extra progress to return?
It’s clear from the group’s newest outcomes that demand for its storage know-how stays sturdy. And with much more AI infrastructure spending anticipated in 2026, analyst projections stay exceptionally bullish.
One has even forecast the inventory may climb to $250 a share by this time subsequent 12 months. In comparison with the place the inventory’s buying and selling at the moment, that interprets into a possible capital achieve of 65.6% backed by the continued growth of revenue margins and tight provide dynamics.
Nevertheless, whereas that is undeniably thrilling, there are nonetheless some crucial dangers to contemplate. With hyperscalers driving the majority of demand, Western Digital’s now develop into reliant on only a handful of consumers for the majority of its income.
Administration’s ramping up its manufacturing capability to fulfill this demand. However ought to AI-infrastructure spending all of a sudden gradual, the market may develop into oversupplied with storage options, pressuring costs and probably reversing the spectacular margin growth loved in 2025.
In different phrases, the destiny of Western Digital shares seems linked to the broader AI market. And if the latter proves to be the bubble that many analysts have begun suspecting, it may spell catastrophe for this S&P 500 inventory.
However, I believe a possibility to contemplate stays on the desk, particularly with a ahead price-to-earnings ratio of simply 18.4. And it’s not the one seemingly moderately priced AI inventory I’ve received my eye on proper now.
