Western Digital Shares Surge on AI Infrastructure Demand and Index Inclusion

A powerful combination of strategic commentary and a major index reshuffle has propelled Western Digital's stock to record levels. The rally raises a critical question for investors: can the company's underlying business sustain this dramatic revaluation?

The recent surge finds its roots in comments made by Nvidia CEO Jensen Huang at CES 2026. He identified data storage as a critical and currently underserved bottleneck for the continued scaling of generative artificial intelligence. This perspective has redirected significant investor capital toward storage infrastructure providers, with Western Digital emerging as a primary beneficiary.

Simultaneously, the company's inclusion in the Nasdaq-100 index created substantial technical buying pressure. The move forced passive funds and institutional investors tracking the index to establish positions, boosting liquidity and contributing to exceptional trading volumes. Recent session volumes were reported at approximately 17.1 million shares.

Financial Performance and Analyst Perspectives

Operational metrics provide some foundation for the market's optimism. Western Digital reported record shipments of 204 exabytes, representing annual delivery growth of 23%. Notably, nearly 89% of the company's revenue is now derived from cloud-related sales, underscoring its strategic pivot toward being a core infrastructure supplier.

Profitability figures also suggest robust demand and pricing power. An EBIT margin of 23.5% and a net margin of 21.3% indicate the company is benefiting from a tight supply environment. Analyst sentiment has turned increasingly bullish. Cantor Fitzgerald raised its price target to $250, while Morgan Stanley maintains an "Overweight" rating with a $228 target.

Should investors sell immediately? Or is it worth buying Western Digital?

At a current price of $219.38, the stock is trading near its 52-week high. Its twelve-month performance shows a staggering gain of +249.8%.

The Path Forward: Key Factors to Monitor

Three interrelated factors will determine if the rally has lasting power. First is the sustainability of demand from hyperscale cloud clients. Second is the company's ability to maintain high shipment volumes. Third, and crucially, is whether Western Digital can defend its elevated margin structure.

The company's own guidance for the second fiscal quarter of 2026—projecting revenue around $2.9 billion and diluted earnings per share of $1.88—will serve as a near-term benchmark for business resilience. Furthermore, the market will watch for confirmation that long-term supply agreements with major customers validate the forecast of constrained industry capacity through 2027.

Conclusion: A confluence of technical and fundamental drivers has significantly revalued Western Digital's equity. The revised valuation appears justified as long as shipment volumes, cloud revenue, and margins continue to meet elevated expectations. A material weakening in any of these pillars would likely make the current upward momentum far more vulnerable.