Key Takeaways:
- Palantir Technologies’ stock surged 135% in 2025, driven by demand for its AI software solutions
- Western Digital’s stock outperformed Palantir, rising 282% in 2025, due to its data storage solutions for AI data centers
- Western Digital is trading at a cheap valuation, with a forward earnings multiple of 23, compared to the Nasdaq-100 index’s average of 33
- The company is expected to deliver healthy double-digit earnings growth for the next three fiscal years, driven by the growing demand for storage solutions in AI data centers
- Western Digital’s stock could potentially hit $319 in the next year and a half, representing a 45% increase from its current price
Introduction to Palantir Technologies
Palantir Technologies, a leading provider of artificial intelligence (AI) software solutions, delivered an impressive 135% return in 2025, driven by the booming demand for its products from both governments and enterprises. As the company’s CEO noted, "the rapid adoption of AI and data-driven workloads at hyperscalers is driving robust demand for our products and solutions." However, investors are now wondering if it’s a good idea to buy Palantir stock, given its expensive valuation of 417 times earnings and 117 times sales. With a 12-month median price target of $200, which is only 11% higher than the current stock price, and only a quarter of analysts recommending a buy, investors are cautious about the stock’s potential for further growth.
Western Digital’s Impressive Growth
In contrast, Western Digital, a data storage solutions specialist, saw its stock surge 282% in 2025, outperforming Palantir. The company’s growth is driven by the increasing demand for storage solutions in AI data centers, with Western Digital now generating nearly 90% of its revenue from the cloud segment. As CEO Irving Tan stated, "the rapid adoption of AI and data-driven workloads at hyperscalers is driving robust demand for our products and solutions." With the amount of data generated globally expected to jump by three times between 2023 and 2028, Western Digital’s addressable market is set to expand rapidly. The company’s non-GAAP earnings increased by 137% year-over-year to $1.78 per share in the first quarter of fiscal 2026, and its top line jumped by 27% to $2.8 billion.
The Storage Market Dynamics
The demand for data center storage is growing at a faster pace than supply, leading to a waiting period of over a year for hard-disk drives (HDDs) and a jump in prices. Western Digital, as one of the leading sellers of storage devices, has decided not to add any more production capacity for now, which is likely to boost prices further. As a result, the company’s earnings growth is expected to come in hotter than analysts’ expectations, both this year and in the next fiscal year. With the company’s decision to limit production capacity, Western Digital is well-positioned to benefit from the favorable market dynamics, as noted by Tom’s Hardware, which reported that each GPU can consume several terabytes of storage.
Why Western Digital is a No-Brainer Buy
Western Digital’s stock is trading at a cheap valuation, with a forward earnings multiple of 23, compared to the Nasdaq-100 index’s average of 33. The company is expected to deliver healthy double-digit earnings growth for the next three fiscal years, driven by the growing demand for storage solutions in AI data centers. If Western Digital’s stock trades in line with the index’s average and delivers $9.67 per share in earnings in the next fiscal year, its stock price could hit $319 in the next year and a half, representing a 45% increase from its current price. As the company’s growth prospects and cheap valuation make it an attractive investment opportunity, investors should consider buying Western Digital stock before it surges higher. With its strong growth potential and favorable market dynamics, Western Digital is a compelling investment opportunity for those looking to capitalize on the growing demand for AI and data storage solutions.
https://www.fool.com/investing/2026/01/09/predict-artificial-intelligence-ai-stock-palantir/