Introduction to the AI Boom
After years of hype surrounding artificial intelligence, the newest breakout stars on Wall Street aren’t sleek AI startups or chipmakers with trillion-dollar valuations. Instead, they’re old-school hardware names that have been around for decades. Seagate Technology Holdings Plc, a company best known for making hard disk drives, has become the top performer in the S&P 500 this year, soaring 156%. Its longtime rival Western Digital Corp. isn’t far behind, ranking third with a 137% surge. Micron Technology Inc., America’s leading producer of memory chips, holds fifth place after a record-breaking 12-session winning streak pushed its 2025 gains to 93%.
The Rise of Old-School Hardware
For market bulls, the stunning rise of these once-overlooked firms proves just how far-reaching demand for AI infrastructure has become. However, bears see the rally as yet another symptom of a stock market bubble that could be primed to burst. The stunning rise of Seagate, Western Digital, and Micron can be attributed to the increasing demand for AI infrastructure. Tech giants like Microsoft Corp. and Alphabet Inc. are pouring tens of billions annually into semiconductors, networking gear, and the massive electricity needs of data centers powering AI workloads.
The Evolution of Hard Drives
Hard drives, once clunky machines that stored five megabytes and weighed over a ton, have evolved into sleek devices holding up to two terabytes while weighing barely more than a pound. Today, they play a central role in training AI models that require enormous amounts of data. The same dynamic is fueling Micron’s rise, with its high-bandwidth DRAM chips being a critical ingredient in AI computing. Although memory technology rarely excites casual investors, it is a crucial component of the AI ecosystem.
Investment Trends and Concerns
The AI boom has also sparked rallies in other unassuming corners of the market. Power producer Vistra Corp. has climbed 53% this year after massive runs in both 2023 and 2024. Broadcom Inc. has reached a market cap of $1.6 trillion following another year of outsized gains. Even Sandisk Corp. has staged a wild rebound, more than doubling since early September. However, some investors warn that the AI theme may be ahead of itself, and that buying companies tied directly to AI or data centers could be a potential cautionary tale.
Valuations and Forecasts
Seagate, Western Digital, and Micron have traditionally been among the cheapest names in the S&P 500, given their cyclical earnings and relatively small followings. All three are currently profitable but have posted losses within the last three years. At the start of 2025, Western Digital traded at less than six times forward earnings, while Seagate and Micron sat around 10 times. Even after their sharp rallies, all three remain cheaper than the S&P 500’s 23x forward multiple. Looking ahead, Seagate’s revenue is forecast to rise 16% in fiscal 2026, after an impressive 39% jump in 2025. Western Digital is projected to rebound 16% this year after a 27% drop last fiscal year. Micron has the strongest trajectory, with sales expected to climb 48% in 2025 and 33% the year after.
Conclusion
The rapid rise of Seagate, Western Digital, and Micron is a testament to the growing demand for AI infrastructure. While some investors see this as a bullish trend, others warn that the rally may be a symptom of a larger market bubble. As the AI boom continues to drive investment in semiconductors, networking gear, and data centers, it’s essential to keep a close eye on valuations and forecasts. With the rapid pace of gains already pushing these stocks ahead of analyst expectations, it’s crucial to approach this trend with caution and consider the potential risks and rewards.
