We recently published a list of 11 trending AI stocks according to the latest news and analyst ratingsWith Western Digital Corp (NASDAQ:WDC) ranking 9th on the list, the company deserves a closer look.
Investors remain cautious after a major global sell-off rocked markets last week on recession fears. Analyst warnings about tech companies’ astronomical capital spending and lack of transparency on returns are also likely to keep tech companies’ valuations in check in the coming weeks.
Speaking to CNBC last month, Roger McNamee of Elevation Partners referenced a Goldman Sachs report that said returns on AI investments could fall short of investors’ expectations.
“The level of capital investment in this sector, currently in the billions of dollars, is so high that it is almost inconceivable that we will achieve a return in the next few years that justifies this level of investment,” McNamee said.
Speaking to Bloomberg, Aisa Ogoshi of JPMorgan Asset Management said there was some “adjustment” ahead in technology stocks as she expected the AI-centric rally to expand to other sectors.
“The key is to keep an eye on earnings trends. It’s easy to panic in these times, but seriously, we should just sit down, look at the numbers and reassess our positioning.”
When asked if she plans to reduce her exposure to AI stocks in the coming days, the analyst said she will be “more selective” in AI investments and increase the quality of stocks in the portfolio.
For this article, we’ve selected 11 trending AI stocks based on the latest news, earnings, and analyst ratings. For each stock, we’ve mentioned the number of hedge fund investors. Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).
Western Digital Corp (NASDAQ:WDC)
Number of hedge fund investors: 65
BofA Securities said in a recent note that Western Digital Corp (NASDAQ:WDC) is among the best-performing technology stocks and represents an attractive entry point after the recent sell-off.
Western Digital Corp (NASDAQ:WDC) is one of Cantor Fitzgerald’s top semiconductor manufacturers. The company recently released its quarterly results. Cloud segment revenue increased 20% quarter-on-quarter. Overall, the company is seeing an increase in profits due to higher prices and a shift toward high-value, high-performance products. The cloud business, especially in high-capacity hard drives for data centers, remains strong.
What are AI-related growth catalysts for Western Digital? How can an SSD and storage device company be called an AI stock?
The rise of artificial intelligence and the associated need for data is positively impacting demand for hard drives and flash storage. Generative AI apps and machine learning require significant data storage, which is a tailwind for Western Digital. The company is well positioned to benefit from this trend, which is still in its early stages.
During the third quarter conference call, the company’s management discussed AI-related business trends:
“I would say AI demand is coming into focus. I don’t think it’s really showing up in the results yet, but we’re seeing the impact it’s going to have on both companies. And one of them that you just outlined is clear: We’re seeing demand for enterprise SSDs coming back. We saw some increase last quarter. We expect an increase this quarter as well. But as we look to the second half of the year, customers are coming to us and wanting the kind of SSDs that we built and qualified before the downturn. They just want them in much larger capacities, 30 and 60 terabytes. So it’s the same product, just we’re increasing the capacity and going through qualification for it, so we’re in that process with customers.
We also launched a new SSD that is more focused on compute. It’s a PCIe Gen 5 product based on BiCS 6 that offers very high performance and plays a slightly different role in the AI training stack. We’re getting very good feedback on that product. It’s qualified by our launch qualification, we’re testing it. We’re sort of getting rid of the hyperscaler qualification and we’re also seeing good demand in the enterprise market. So we think the portfolio is well positioned for the second half of the year and we’re seeing a lot of demand for people building very large amounts of infrastructure for model training.”
Overall, Western Digital Corp (NASDAQ:WDC) ranks 9th on Insider Monkey’s list of the titled 11 trending AI stocks according to the latest news and analyst ratings. While we recognize the potential of Western Digital Corp (NASDAQ:WDC), we believe AI stocks promise higher returns and do so in a shorter period of time. If you’re looking for an AI stock that shows more promise than WDC but trades at less than 5 times earnings, read our report on the cheapest AI stock.
