The enormity of what’s happening in digital storage becomes something you can feel rather than just compute as you go around the data center facilities being built throughout Northern Virginia, outside of Phoenix, or in the expansive industrial parks outside of Singapore. The servers are arranged in rows that seem to go on forever. The cooling systems are always in operation.
Western Digital’s products, such as solid state storage, NAND flash, and hard drives, are working somewhere inside that infrastructure to enable everything else. Storage is needed for the AI boom. Storage is needed for the cloud boom. Every piece of data produced by every connected device eventually finds a physical location, and Western Digital has been creating that location for more than 50 years.
There have been many spectacular stories in the semiconductor and storage industry, but the WDC stock narrative during the last 12 months is one of the most dramatic. The stock was trading close to $57.88 a year ago, which was indicative of a real industry slowdown, an oversupply in the NAND flash market, and concern regarding the company’s strategic path when it decided to split its HDD and flash operations.
The stock reached a new 52-week high today at $729.92 intraday before declining to about $684 by the middle of the session. That is a change of about 1,160% from peak to trough in just one year. A second read is necessary since the number is so remarkable. It is genuine.
What kind of day this was may be inferred from the volume. WDC’s average daily volume is approximately 8.07 million shares. The volume for today was 15.86 million, which is about twice the usual pace. This indicates that a wide spectrum of market players were closely monitoring the intraday movement rather than waiting it out.
When volume rises this much above average on a day that also reaches a 52-week high, it usually indicates one of two things: either a catalyst has surfaced that attracted new buyers, or current holders were taking advantage of the high to take some profits, or both. The fact that the stock closed at $684 after reaching $729 indicates that there was significant selling into the strength, which is common when a stock hits a new high on significant volume.
The rebound from $57 to this point was driven by a number of convergent forces. As production discipline improved throughout the industry, the NAND flash glut that had squeezed pricing and, consequently, margins through much of 2023 and into 2024 started to correct. Simultaneously, the demand for storage capacity in AI infrastructure projects increased since, in addition to the GPU compute that receives the majority of attention, training huge models and storing the resulting outputs require massive quantities of storage.
Western Digital, which operates both flash storage and conventional hard drives, was well-positioned to profit from the structural rise in data center demand as well as the NAND pricing recovery. The market has repriced the company from a cyclical downturn story to something with more durable growth characteristics, as evidenced by the P/E ratio of 39.01 times earnings.
A year ago, Western Digital was facing one of the most challenging environments in its history as a publicly traded company. CEO Tiang Yew Tan has been leading the company through this period. The market seems to have benefited from the clarity that the reorganized organization offers.
The strategic separation of the HDD and flash divisions—creating two more focused businesses rather than one diversified one—took some time to create and implement. Instead of needing to accept a blended exposure to both hard drives and flash storage, which historically made valuation more complicated and the shareholder base more difficult to target, investors may now place a more direct wager on either.
