Morgan Stanley Names Western Digital (WDC) a 2026 Top Pick Amid Cloud Capital Expenditure Boom

Western Digital Corporation (NASDAQ:WDC) is one of the best performing S&P 500 stocks in 2025. On December 17, Morgan Stanley raised the firm’s price target on Western Digital to $228 from $188 with an Overweight rating on the shares. The firm advised investors to maintain an Overweight position in IT Hardware companies that benefit from cloud capital expenditures and product cycles. Conversely, the firm remains increasingly cautious on manufacturers with high memory exposure due to the margin pressures associated with rising component costs.

A day before this rating, Cantor Fitzgerald analyst C.J. Muse also raised the firm’s price target on Western Digital to $250 from $200 while keeping an Overweight rating on the shares. After outperforming the S&P 500 by ~30 points in 2025, SOX is expected to continue leading the market higher due to the massive demand for compute, networking, memory, and equipment generated by the early AI era.

While some cyclical factors might cause short-term volatility, the firm believes the combination of a favorable macroeconomic environment and the anticipated exponential surge in AI infrastructure spending justifies a long position in the SOX and an overweight allocation to AI-related stocks heading into 2026.

Western Digital Corporation (NASDAQ:WDC) develops, manufactures, and sells data storage devices and solutions based on hard disk drive/HDD tech in the US, Asia, Europe, the Middle East, and Africa.

While we acknowledge the potential of 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.

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