The Hidden AI Winner That Wall Street May Be Ignoring

Over the past few years, certain companies have emerged as clear artificial intelligence (AI) winners of today and tomorrow. These have been players like Nvidia, which designs the key element needed to power AI -- the AI chip -- as well as companies that offer cloud services, or the infrastructure needed to run AI workloads. These are giants such as Amazon as well as smaller AI-focused companies like CoreWeave.

In any case, these AI players have garnered a great deal of attention from investors and Wall Street analysts. But there exists an AI winner that Wall Street may be ignoring. Though analysts expect this stock to advance and generally hold a buy rating on it, this player hasn't dominated the headlines like the companies I mentioned above. So it may not be on the radar screens of many investors. Let's take a look at this hidden AI winner.

Image source: Getty Images.

An expert in data storage

The company I'm talking about has been around for more than 50 years, serving the technology world with a basic element, but one that is essential for computing to take place and certainly for AI to unfold. This player is Western Digital (NASDAQ: WDC), an expert in storage innovation.

Western Digital sells hard disk drive (HDD) based storage devices and systems -- and this is something that's clearly in great demand in the age of AI. The ability to store data has been essential in the training of models, and moving forward, this will continue to be crucial as these models are put to work to handle real-world problems. HDD offer cloud companies an economical and proven way to store data -- and both of these points are key. Cloud players are investing billions -- and potentially trillions -- of dollars to build out data centers, so they are looking for ways to keep costs in check and deliver reliability to customers.

Western Digital is a confirmed leader, with "much of the world's data stored on Western Digital products," as the company said in its latest annual report. So, it's likely that cloud leaders will turn to this player they know well as they build out infrastructure.

Benefiting from the AI boom

This storage leader already has started to benefit from the AI boom. In the most recent quarter, Western Digital's revenue climbed, and gross margin expanded, showing increasing profitability on sales. The company reported a 25% gain in revenue to more than $3 billion, and gross margin widened to 45.7% year over year from 37.7%.

Western Digital stock has climbed over the past year, but, trading for only 28x forward earnings estimates, the shares still could have room to run. And as HDDs emerge as a key element serving AI, more and more investors may start talking about this stock.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Nvidia, and Western Digital. The Motley Fool has a disclosure policy.