Is Western Digital Corp (WDC) Benefitting From AI Spending?

Night Watch Investment Management, an investment management firm, released its third-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the third quarter, the fund LP appreciated by 4.28% net of fees, and YTD, its performance stood at 25.88%. The portfolio continued its strong performance in the quarter. The market also experienced a strong recovery in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Night Watch Investment Management highlighted stocks such as Western Digital Corporation (NASDAQ:WDC). Western Digital Corporation (NASDAQ:WDC) offers data storage devices and solutions based on hard disk drive (HDD) technology. The one-month return for Western Digital Corporation (NASDAQ:WDC) was -1.20%, and its shares gained 199.80% over the last 52 weeks. On December 04, 2025, Western Digital Corporation (NASDAQ:WDC) stock closed at $161.00 per share, with a market capitalization of $55.19 billion.

Night Watch Investment Management stated the following regarding Western Digital Corporation (NASDAQ:WDC) in its third quarter 2025 investor letter:

"We initiated 2 positions in tech that benefit from AI-related spending. Western Digital Corporation (NASDAQ:WDC) became a pure play on hard disk drives after it spun off its subsidiary Sandisk. The HDD industry has transformed into a duopoly where WDC and Seagate seem eager to control supply, while demand for storage capacity is growing rapidly on the back of data center investments.

We believe that AI infrastructure spending will prove to be cyclical, and will settle at a level well below current levels. Our involvement in this trend will be limited to a handful of outliers such as WDC where the market was late to recognize the positive impact on their earnings."

Western Digital Corporation (NASDAQ:WDC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 84 hedge fund portfolios held Western Digital Corporation (NASDAQ:WDC) at the end of the third quarter, which was 74 in the previous quarter. In the first quarter of fiscal 2026, Western Digital Corporation (NASDAQ:WDC) reported revenue of $2.8 billion, up 27% year-over-year. While we acknowledge the potential of Western Digital Corporation (NASDAQ:WDC) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Western Digital Corporation (NASDAQ:WDC) and shared the list of best performing AI stocks heading into 2026. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.