What triggered the latest move in Western Digital (WDC)?

Western Digital (WDC) recently drew fresh attention after Bernstein shifted its view on the stock to Outperform, pointing to demand for AI driven data center storage and a supportive sector backdrop.

That upgrade comes on top of powerful recent momentum, with Western Digital’s 30 day share price return of 13.87% and 90 day share price return of 57.15%. The 1 year total shareholder return is also extremely high, pointing to a strong rerating of the stock.

If AI storage demand has your attention, it could be a useful moment to widen your search and review 36 AI infrastructure stocks

With Western Digital now valued at about US$100b and trading roughly 11% below the current analyst price target, the key question is simple: are you looking at an undervalued AI storage play or a stock where markets are already pricing in future growth?

Most Popular Narrative: 8.1% Undervalued

Western Digital's most followed narrative sets a fair value of $321 per share, compared with the last close at $294.97, putting the focus squarely on AI driven storage demand and margin ambition as the key drivers behind that gap.

The explosive increase in unstructured data generated by AI applications, Agentic AI, and cloud-based services across industries is driving unprecedented storage needs. Western Digital's deep integration with leading hyperscalers (e.g., all top 5 with firm POs/LTAs covering the next 12 to 18 months) positions the company to benefit from secular demand, directly fueling higher long-term revenue growth.

Curious what kind of revenue path, margin structure and future earnings multiple are baked into that fair value. The narrative leans on firm customer commitments, ambitious profitability targets and projected growth in AI storage workloads, all wired into a discounted cash flow view that uses a specific required return and forward P/E assumption, without revealing everything on the surface.

Result: Fair Value of $321 (UNDERVALUED)

However, there is still real execution risk if hyperscale customers change course or newer storage technologies gain traction faster than Western Digital’s HDD roadmap can keep up.

Another Way To Look At Value

The popular AI driven narrative leans on a fair value of $321, yet our DCF model points to a future cash flow value of $523.56 per share, which is a much steeper gap to the current $294.97 price and frames Western Digital as deeply undervalued instead.

That kind of spread can be exciting. It also raises a practical question for you as an investor: are the cash flow assumptions ambitious, or is the market still discounting execution and AI storage risks too heavily?

Next Steps

With enthusiasm around AI storage running high, it helps to step back, move quickly, and test the story against your own expectations of risk and upside through 3 key rewards and 3 important warning signs

Looking for more investment ideas?

If Western Digital has sparked your interest, do not stop here. Broaden your watchlist now so you are not relying on a single AI storage story.

• Spot potential bargains early by scanning 59 high quality undervalued stocks that combine quality traits with pricing that still looks compelling.
• Lean toward resilience by searching 68 resilient stocks with low risk scores where companies show lower risk scores that may suit a steadier approach.
• Hunt for future standouts using the screener containing 25 high quality undiscovered gems before they sit firmly on everyone else's radar.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.