In 2023 and 2024, Nvidia dominated as the best-performing stock in the S&P 500. However, in 2025, Western Digital is making a strong push to claim the top spot, fueled by the AI trend and a 250% year-to-date increase in its stock value. Western Digital focuses on hard disk drive memory products, catering to the growing demand for memory products in data centers.

The cyclical nature of the memory product industry is exemplified in Western Digital’s historical business trends, where high demand leads to revenue surges and profit margin expansions, but low demand results in steep losses. Despite the current profitability with a 23% operating margin, investors need to be aware of the potential cyclical shifts in demand affecting future performance.

While Western Digital’s stock has surged in 2025, trading at reasonable earnings multiples, investors should consider the sustainability of elevated profits amidst the AI trend driving memory demand. The company’s fiscal 2026 outlook anticipates a 20% growth rate and record-high gross margins, reflecting positive momentum for the year ahead.

Investors are advised to keep an eye on Western Digital’s performance beyond 2026, as the company’s management hints at sustained demand for memory products from data center build-outs. With a focus on rewarding shareholders through debt reduction, share repurchases, and dividend initiation, Western Digital is leveraging its profits for long-term growth potential.

As the AI trend continues to evolve, Western Digital’s success hinges on the ongoing demand for memory products driven by personalized agentic AI agents. While past down cycles in the memory industry may influence investor perceptions, the potential for sustained growth with agentic AI presents a compelling case for Western Digital’s future prospects.

Read more at Yahoo Finance: Meet the Little-Known Artificial Intelligence (AI) Stock Leading the S&P 500 in 2025 (Hint: Not Nvidia)