We recently compiled the list of the 15 Best Hardware Stocks According To Goldman Sachs using the latest sentiment data. In this article, we are going to take a look at where Western Digital Corporation (NASDAQ:WDC) stands against the other hardware stocks.
The soaring popularity of artificial intelligence for consumer and business applications has injected fresh life into the computing industry. If we’re to rewind the hands of time and go back to 2022, the stock market environment was considerably different from what it is now. All major technology stocks, including those that are responsible for making chips that power AI workloads were down by double digit percentages in the wake of breakneck inflation and rising interest rates.
Fast forward to 2024 and the rise in valuations seems to have no end in sight. One bank that’s quite optimistic about artificial intelligence is Goldman. Goldman’s analyst teams are among the best in the world, and they spend countless hours analyzing stocks and industries for the right set of picks that could disrupt the industry.
On this front, Goldman came out with a note recently that outlined a new beginning for the computer hardware industry. According to the bank, the introduction of AI has necessitated a global shift to new hardware that can support the technology. In its note, the bank’s analysts shared:
During the pandemic, the tech hardware industry peaked as the majority of work-from-home employees purchased equipment. The space currently has fully unwind this cycle and we notice stocks like HPQ trading at 9x their 2025 earnings estimates.
Most PCs purchased during the pandemic are expected to be replaced soon. We expect discernable new features of AI, enhanced security, and stronger computational power in upcoming PC and mobile device models, incentivizing the US consumer to spend more on newer equipment than historically, creating an unusually stronger cycle.
Goldman also created a basket of stocks where the highest weighted stock has an 8% weight and there are 20 stocks in the basket. According to Goldman analyst Faris Mourad:
The basket is composed of technology hardware stocks that may benefit from PC and mobile device renovations that could include AI features. The basket can trade up to $250m in one day with no name exceeding 10% of ADV.
Considering this optimism, we decided to take a look at the top Goldman’s top 15 hardware stock picks.
Our Methodology
To make our list of the top Goldman Sachs hardware stocks, we used the top holdings of the bank’s PC & Mobile Device AI Upgrades basket (GSXUPCAI).
For these hardware stocks, we also mentioned hedge fund investors. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
5. Western Digital Corporation (NASDAQ:WDC)
Number of Hedge Fund Shareholders In Q1 2024: 65
Western Digital Corporation (NASDAQ:WDC) is a hardware company that makes and sells storage devices. The average of 21 analyst share price targets for the stock is $90.32 and the shares are rated Buy on average. Western Digital Corporation (NASDAQ:WDC) also makes advanced NAND storage devices, and these were at the center of a bullish note by Susquehanna in June 2024. The firm raised Western Digital Corporation (NASDAQ:WDC)’s share price target to $88 from $80; however, it kept a Neutral rating on the shares. Susquehanna shared NAND selling prices can jump in the future, and it added that Western Digital Corporation (NASDAQ:WDC) is well positioned to capture the market.
Western Digital Corporation (NASDAQ:WDC)’s forward price to earnings ratio of 12.61 is lower than the market’s 21. This implies that investors might be looking elsewhere for growth. Commenting on its NAND products during the latest earnings call, management shared:
Our portfolio strategy to commercialize ePMR, OptiNAND and UltraSMR technologies in advance of our transition to HAMR, has proven to be the winning strategy and enables us to deliver to customers the industry’s highest capacity and leading TCO drives, all of which can be produced at scale with controlled costs. We are confident that our product strategy, which combines UltraSMR technology with upcoming advancements in nearline drives is enabling Western Digital to deliver best-in-class gross margin in HDDs all at a time when AI is emerging as another growth engine for the industry.
Overall, WDC ranks 5th among the 15 best hardware stocks to buy according to famed investment bank. You can visit the 15 Best Hardware Stocks According To Goldman to see the other hardware stocks. While we acknowledge the potential of WDC as an AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WDC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. The article was originally published at Insider Monkey.