Western Digital: A Data Storage Giant in Paul Singer’s AI Infrastructure Play

Western Digital Corporation (NASDAQ: WDC) has emerged as a key beneficiary of the AI-driven data explosion, earning a prominent spot on billionaire Paul Singer’s list of top stock picks for 2025. Elliott Management, Singer’s activist investment firm, has significantly increased its stake in WDC, betting on its strategic position in cloud storage and enterprise infrastructure. This article explores the rationale behind this investment, WDC’s financial performance, and its potential upside in a rapidly evolving tech landscape.

Ask Aime: "Is Western Digital's strategic position in cloud storage a smart bet for 2025?"

Why Western Digital? A Deep Dive into the Investment Thesis

Financial Performance: Cloud Dominance and Operational Turnaround

Western Digital’s fiscal Q3 2025 results showcased robust growth, with $4.1 billion in revenue, a 9% sequential increase, and a 1,588% jump in net income to $1.35 per share. The company’s Cloud end market, which accounts for 87% of total revenue, grew 38% year-over-year, driven by rising demand for mass storage solutions from enterprise workloads and AI-generated content.

Despite a 6% sequential dip in near-line bit shipments due to customer deployment schedules, the average selling price (ASP) in the cloud sector rose 5% sequentially to $179 per unit. This pricing power, combined with long-term agreements with two major cloud customers extending through mid-2026, underscores WDC’s stability and visibility in a critical growth market.

Strategic Moves: Focusing on HDDs and AI Infrastructure

Western Digital’s spin-off of its NAND flash division into SanDisk in 2023 has allowed the company to concentrate on high-capacity HDDs for enterprise and data center markets. This shift aligns with the AI-driven demand for cost-efficient storage, where HDDs offer superior economics for large-scale training and data storage compared to SSDs.

The company is also expanding its portfolio of high-performance enterprise HDDs and SSDs, targeting the $80 billion data storage market, which is expected to grow at a 7% CAGR through 2030.

Analyst and Institutional Sentiment

• Benchmark’s Upgrade: In April 2025, Benchmark upgraded WDC from Hold to Buy, citing advancements in flash memory and nearline drives, with a $55 price target (implying 28% upside from its May 2025 valuation).
• Hedge Fund Backing: WDC is held by 85 hedge funds, signaling broad institutional confidence.

However, some funds, like Parnassus Mid Cap, acknowledge WDC’s potential but prefer pure-play AI stocks for shorter-term returns, highlighting a sector-wide debate over infrastructure vs. speculative AI plays.

Ask Aime: What's the future of Western Digital?

Paul Singer’s Perspective: A Contrarian Bet on Infrastructure

Singer, known for his skepticism toward overvalued AI stocks, has criticized “exaggerated” valuations in the sector. Yet his firm’s WDC stake reflects a contrarian focus on undervalued infrastructure enabling AI growth. WDC’s $134.17 million position in Elliott’s portfolio ranks it 7th among Singer’s top picks, with an average upside potential of 30.93% (as of May 2025).

Caveats and Risks

• AI Stock Preference: While WDC is a solid investment, Singer’s broader portfolio suggests a preference for energy and materials stocks (e.g., Triple Flag Precious Metals, Suncor Energy), which he believes are less overvalued.
• Market Risks: WDC faces macroeconomic headwinds, including recession fears and trade tariffs, which could dampen global tech spending.

Conclusion: WDC as a Core Infrastructure Play

Western Digital’s inclusion in Paul Singer’s top picks is no accident. Its dominance in cloud storage, strategic focus on HDDs for AI infrastructure, and institutional backing position it as a critical beneficiary of the data economy’s expansion. With a 30.93% upside potential and long-term contracts securing its revenue stream, WDC offers a defensive yet growth-oriented investment in a sector primed for secular growth.

While pure-play AI stocks may offer faster returns, WDC’s debt-free balance sheet, operational resilience, and exposure to AI’s hidden demand for cost-efficient storage make it a compelling long-term holding. For investors seeking stability amid tech volatility, WDC represents a rare blend of value and strategic positioning in a $multi-trillion industry.

In a market where data is the new oil, Western Digital is the refinery—and Singer’s bet suggests it’s positioned to profit for years to come.