S&P 500's Top Stock of 2025: Western Digital

Subscribers to Chart of the Week received this commentary on Sunday, January 4.

As we usher in a new year of trading, it can be beneficial to take one final look at 2025, especially surrounding those that managed to outperform beyond initial expectations. A 16.4% 2025 gain for the S&P 500 Index (SPX) lagged the previous two years, but is still in the top 7 of annualized returns going back 20 years. Behind this sustained 24 month is outperforming tech stocks taking advantage of the artificial intelligence boom.

Seagate Technology (STX) placed third with a 219% 2025 return, Micron Technology (MU) second at 239%, and Western Digital (WDC) lapped the competition with a 283% gain. WDC spinoff SanDisk (SNDK) deserves an asterisk, catapulting more than 550% off its February initial public offering (IPO) price of $38.50.

This marked WDC’s third-consecutive yearly win. The shares relied on a mixture of post-earnings melt-ups and remarkable consistency. The stock collected a total 31.7% post-earnings returns over the four earnings reports in 2025, and after April, only clocked five weekly losses.

While the shares tapped a record high of $188.77 on Dec. 11, they have been unable to overtake $189, despite several attempts over the past three weeks. All year support have come from the nearly vertical 20- and 50-day moving averages.

Not only did Western Digital stock best the S&P 500 Index, but it landed on Schaeffer’s Senior Quantitative Analyst Rocky White’s list of the highest average straddle returns in 2025. White calculated returns on four-week straddles starting in 2025.

In a sense, this strategy removes direction from the equation, because the position can profit whether the stock goes up or down. The stock, however, must sustain a direction one way or the other within the four-week timeframe for the straddle to pay off. WDC saw an average straddle return of 101.1% for 2025, positive 74% of the time. STX also made the list, pulling an average straddle return of 67.3%, positive 57% of the time. In other words, AI straddle players left 2025 profitable and happy.

Should we trust the AI trade in 2026? Per Barron’s, some analysts think so. As investors continue to shift away from hyperscalers, data storage companies will only continue to benefit. With AI demand remaining attractive as we ebb into the new year, even a valuation bubble is unlikely to fully extinguish long-term optimism.

AI companies need to data storage amid a rabid demand, and that’s been the fuel to WDC’s consistency these last 12 months. The consolidation could be your last time to take a flier on the stock before it resumes its uptrend; 9.2% of the stock’s total available float is sold short, and the consensus 12-month price target of $184.04 is a discount to its current perch. And with a Schaeffer’s Volatility Index (SVI) of 51% that sits in the 23rd percentile of annual readings, options traders are now pricing in low volatility expectations, the perfect time to snag one of those historically-reliable straddles.