In fact, even with all the recent volatility, index investors have nonetheless earned a robust 15.6% return since the start of the year, including dividends. As such, a £7,000 investment at the start of January is now worth roughly £8,092.

And yet some stock pickers have generated even more explosive gains. In fact, Western Digital (NASDAQ:WDC) has more than tripled, rising by 222.7% leaving more popular stocks like Nvidia in the dust this year!

For the investors who were smart enough to spot this growth opportunity, their £7,000 is now worth over £22,589!

But of course, the question now becomes, can Western Digital shares do it again in 2026?

The AI winner everyone ignored

Nvidia’s reaped enormous profits by selling semiconductor chips to power machine learning models. But Western Digital has joined in the gold rush by selling the solution to the enormous data storage requirements of these AI models.

The group specialises in making hard disk drives (HDDs) and solid state drives (SSDs) for both consumers and enterprises alike. But it’s the latter driving the bulk of demand right now.

With the company receiving record-breaking order volumes, revenue for its 2025 fiscal year (ending in June) jumped by an impressive 51%. But it was underlying operating profits that stole the show, rising from $343m to a staggering $2.3bn – a 578% surge.

This momentum has continued into the first quarter of its 2026 fiscal year, with sales up 27% year on year and operating profits more than doubling by 110%. With all this momentum in mind, it’s no surprise that Western Digital shares have skyrocketed in 2025.

More growth to come?

It’s clear from the group’s latest results that demand for its storage technology remains robust. And with even more AI infrastructure spending expected in 2026, analyst projections remain exceptionally bullish.

One has even forecast the stock could climb to $250 a share by this time next year. Compared to where the stock’s trading today, that translates into a potential capital gain of 65.6% backed by the continued expansion of profit margins and tight supply dynamics.

However, while this is undeniably exciting, there are still some critical risks to consider. With hyperscalers driving the bulk of demand, Western Digital’s now become reliant on just a handful of customers for the bulk of its profits.

Management’s ramping up its production capacity to meet this demand. But should AI-infrastructure spending suddenly slow, the market could become oversupplied with storage solutions, pressuring prices and potentially reversing the impressive margin expansion enjoyed in 2025.

In other words, the fate of Western Digital shares appears linked to the wider AI market. And if the latter proves to be the bubble that many analysts have begun suspecting, it could spell disaster for this S&P 500 stock.

Nevertheless, I think an opportunity to consider remains on the table, especially with a forward price-to-earnings ratio of just 18.4. And it’s not the only seemingly reasonably priced AI stock I’ve got my eye on right now.

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As money moves away from overhyped chips, attention is turning to another key cog in the AI machine — digital storage. Every AI query needs to be written somewhere, and those billions of queries quickly stack up. External solid-state drives (eSSD) have become the go-to option, with adoption driven by their reliability and efficiency compared with older hard disk drives (HDDs).

Generative AI usage exploded to 65% in 2024 from 33% in 2023. As the models balloon in size, storage demand is surging. It reminds me of the Coloma gold rush in the 1850s. The prospectors often failed, but the shovel sellers got rich. Today, digital storage firms are the modern-day shovel sellers of the AI age. Two giants stand out — Seagate Technology and Western Digital (NASDAQ: WDC).

Seagate’s share price has already rocketed 120% in 2025, leaving it looking a little stretched. So I’ve been taking a closer look at Western Digital instead.

Western Digital

Western Digital is one of the largest producers of HDDs, SSDs, and flash memory worldwide. Its stock has climbed an impressive 109% this year. The latest quarterly results show why. Revenue came in at $2.61bn, a 30% increase year on year, beating analyst expectations by nearly 5%.

Its cloud business — which now makes up 90% of total sales — jumped 36%. Shipments of its next-generation 26TB CMR drives and 32TB UltraSMR drives doubled. This type of innovation is exactly what AI developers need to keep up with soaring data demand.

Financially, the company looks healthier than some rivals. Unlike Seagate, where liabilities outweigh assets, Western Digital’s balance sheet remains balanced, with a debt-to-equity ratio of 0.96. Operating cash flow hit $1.87bn in the most recent period, giving it breathing space to invest in the next wave of storage tech.

So is the stock worth considering?

Some analysts seem to think the stock is worth considering. On 8 September, Citigroup reiterated a Buy rating, nudging its price target up from $88 to $110. Forecasts suggest earnings could grow 31.9% in the current financial year ending June 2026. Plus, its forward price-to-earnings (P/E) ratio of 14.4 still looks reasonable when compared with many AI-related stocks trading at eye-watering multiples.

There are risks, of course. Western Digital faces stiff competition from Seagate, Micron, and Samsung, all of which are fighting for the same enterprise storage contracts. A large proportion of sales are concentrated among a handful of big customers. If one of these giants were to cut orders or switch suppliers, earnings could take a serious hit. And like Nvidia, there’s always the risk that excitement pushes the valuation too high, too quickly.

So while Western Digital is not risk-free, compared with many AI stocks, its valuation looks more grounded. With strong revenue growth, improving margins, and a healthy balance sheet, I think it’s one to consider for investors seeking more stable exposure to the AI boom.

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