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Missed NVIDIA? This AI Infrastructure Stock Has More Room to Run
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Key Takeaways
Western Digital expects stronger Q4 revenues as AI storage demand from cloud and enterprise customers grows.
WDC projects higher gross margins, supported by enterprise HDD demand and favorable pricing.
Analysts see upside for WDC, with strong earnings growth forecasts and price targets above current levels.
NVIDIA Corporation (NVDA - Free Report) has delivered muted gains this year, up only 10.9% despite posting encouraging quarterly results. This is primarily because after several years of exceptional gains, investors’ expectations have become exceptionally high. Consequently, even upbeat quarterly results have not been able to drive the stock significantly higher.
NVIDIA’s state-of-the-art Blackwell chips and CUDA software platform fueled its exceptional growth. However, investors are increasingly questioning whether NVIDIA can remain the market leader as competition intensifies from rivals like Advanced Micro Devices, Inc. (AMD - Free Report) . Moreover, any slowdown in AI infrastructure spending by hyperscale cloud providers could weigh on NVIDIA’s margins. U.S. controls on the sale of cutting-edge artificial intelligence (AI) chips to China have already limited NVIDIA’s access to an important market, creating pressure on margins.
The ongoing geopolitical uncertainties have also made investors cautious about investing in large-cap AI stocks, including NVIDIA. The company’s heavy dependency on Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) for chip production has heightened concerns about potential supply-chain disruptions. Additionally, NVIDIA’s current lofty valuations have left little room for multiple expansion, prompting some investors to remain cautious despite its strong operating performance.
Although NVIDIA’s amazing rally seems to have run its course for new investors, the broader AI ecosystem continues to offer compelling growth opportunities. They may consider AI infrastructure player Western Digital Corporation (WDC - Free Report) , known for supplying enterprise storage solutions for AI workloads. Its shares have soared 201.8% so far this year and appear well positioned to extend its rally. Let’s explore why Western Digital could be the next standout performer –
WDC’s AI Storage Boom Could Drive the Next Leg Higher
An increase in demand for Western Digital’s high-value enterprise hard disk drives (eHDDs) and a favorable pricing environment have helped the company post revenues of $3.34 billion in the fiscal third quarter of 2026, up 45% year over year, per the press release.
Most importantly, revenues are expected to improve to about $3.65 billion, plus or minus $100 million, in the fiscal fourth quarter of 2026, a telltale sign that demand for AI infrastructure remains strong, as enterprises and cloud providers continue to expand storage capacity to accommodate growing AI workloads.
For the fiscal fourth quarter, Western Digital further expects non-GAAP gross margin to reach 51-52%, up from 50.5% in the fiscal third quarter. The expected margin expansion should strengthen the company’s profitability and provide additional financial resources to fund long-term growth initiatives.
Therefore, strong demand for AI infrastructure, revenue growth, and expanding margins would propel Western Digital’s stock higher in the near term. Thus, the company’s expected earnings growth rate for the current year is a solid 104.3%. The Zacks Consensus Estimate of $10.07 for WDC’s earnings per share is up 54.9% year over year.
Image Source: Zacks Investment Research
Brokers also remain optimistic about Western Digital’s growth outlook, with the average short-term price target for WDC stock at $638.27, representing a 14.3% upside from its last closing price of $558.30. The highest price target stands at $1,050, suggesting a potential upside of 88.1%.
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Missed NVIDIA? This AI Infrastructure Stock Has More Room to Run
Key Takeaways
NVIDIA Corporation (NVDA - Free Report) has delivered muted gains this year, up only 10.9% despite posting encouraging quarterly results. This is primarily because after several years of exceptional gains, investors’ expectations have become exceptionally high. Consequently, even upbeat quarterly results have not been able to drive the stock significantly higher.
NVIDIA’s state-of-the-art Blackwell chips and CUDA software platform fueled its exceptional growth. However, investors are increasingly questioning whether NVIDIA can remain the market leader as competition intensifies from rivals like Advanced Micro Devices, Inc. (AMD - Free Report) . Moreover, any slowdown in AI infrastructure spending by hyperscale cloud providers could weigh on NVIDIA’s margins. U.S. controls on the sale of cutting-edge artificial intelligence (AI) chips to China have already limited NVIDIA’s access to an important market, creating pressure on margins.
The ongoing geopolitical uncertainties have also made investors cautious about investing in large-cap AI stocks, including NVIDIA. The company’s heavy dependency on Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) for chip production has heightened concerns about potential supply-chain disruptions. Additionally, NVIDIA’s current lofty valuations have left little room for multiple expansion, prompting some investors to remain cautious despite its strong operating performance.
Although NVIDIA’s amazing rally seems to have run its course for new investors, the broader AI ecosystem continues to offer compelling growth opportunities. They may consider AI infrastructure player Western Digital Corporation (WDC - Free Report) , known for supplying enterprise storage solutions for AI workloads. Its shares have soared 201.8% so far this year and appear well positioned to extend its rally. Let’s explore why Western Digital could be the next standout performer –
WDC’s AI Storage Boom Could Drive the Next Leg Higher
An increase in demand for Western Digital’s high-value enterprise hard disk drives (eHDDs) and a favorable pricing environment have helped the company post revenues of $3.34 billion in the fiscal third quarter of 2026, up 45% year over year, per the press release.
Most importantly, revenues are expected to improve to about $3.65 billion, plus or minus $100 million, in the fiscal fourth quarter of 2026, a telltale sign that demand for AI infrastructure remains strong, as enterprises and cloud providers continue to expand storage capacity to accommodate growing AI workloads.
For the fiscal fourth quarter, Western Digital further expects non-GAAP gross margin to reach 51-52%, up from 50.5% in the fiscal third quarter. The expected margin expansion should strengthen the company’s profitability and provide additional financial resources to fund long-term growth initiatives.
Therefore, strong demand for AI infrastructure, revenue growth, and expanding margins would propel Western Digital’s stock higher in the near term. Thus, the company’s expected earnings growth rate for the current year is a solid 104.3%. The Zacks Consensus Estimate of $10.07 for WDC’s earnings per share is up 54.9% year over year.
Image Source: Zacks Investment Research
Brokers also remain optimistic about Western Digital’s growth outlook, with the average short-term price target for WDC stock at $638.27, representing a 14.3% upside from its last closing price of $558.30. The highest price target stands at $1,050, suggesting a potential upside of 88.1%.
Image Source: Zacks Investment Research
Western Digital currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.