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Investing.com — The AI trade usually rewards the chips that process data, but this week the companies that store it were dragged down fast. After Democratic midterm wins revived talk of AI regulation, Western Digital (NASDAQ:WDC) fell 13.5% on Thursday and is down 26.7% over the past month, while memory names such as Micron Technology (NASDAQ:MU) sold off alongside it.
Yet every training run and inference request creates data that has to be kept somewhere, and hard drives remain the cheapest place to keep it.
Separating lasting demand from panic is the purpose of screening on fundamentals, and this is the idea behind ProPicks AI’s Tech Titans strategy. Its November rebalance holds a dominant chip-inspection equipment supplier, a specialized contract chipmaker and an enterprise developer platform.
Check which tech stocks made November’s list: Explore the Tech Titans strategy on InvestingPro
Hard Drives Stay the Low-Cost Home for AI Data
Flash storage still costs five to eight times more per terabyte than nearline hard drives, so hyperscalers building cold-storage and inference archives keep buying the latter. Western Digital became a pure-play drive maker when it spun off its flash business in February 2025, and it now shares the high-capacity enterprise market with Seagate Technology (NASDAQ:STX). About 90% of its revenue comes from cloud customers, and long-term agreements with its top seven customers extend visibility to 2030 and 2031, with fiscal 2027 production already sold out.
The latest quarter shows the pricing power behind that. Fiscal first-quarter revenue rose 55% to $4.38 billion, gross margin widened 1,420 basis points to 58.1%, and the company produced $1.4 billion in free cash flow while ending with $500 million of net cash. Management guided second-quarter revenue to $5.1 billion, about 69% above a year earlier at the midpoint, and expects exabyte demand to grow more than 25% a year over the next five years, while calling the current quarter the floor for exabyte growth. A 17% dividend increase followed the results.
Cheap on Earnings, Cheaper on Fair Value
The sell-off has left the shares cheaper on earnings. Western Digital trades at 12.2 times trailing earnings and 12.8 times fiscal 2027 estimates, falling to 7.95 times for fiscal 2028, with a PEG ratio of 0.04, against 29.1 times trailing earnings for Seagate.
InvestingPro’s Fair Value, which aggregates multiple discounted cash flow approaches, sets the stock at $476.3, a 78.0% upside to the $267.6 share price, with an “Undervalued” label. Wall Street sees even more room: consensus analyst projections compiled on InvestingPro put the price target at $613.38, and earnings estimates carry 16 upward revisions and none downward over 90 days.
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