The computer storage devices industry players are likely to gain from solid momentum in cloud computing, Internet of Things (IoT), auto, connected devices, virtual reality and artificial intelligence (AI) in the long run. These factors propel the demand for robust data storage solutions, bolstering computer storage product requirements.
Within the Technology sector, the Zacks-defined Computer-Storage Devices industry is currently within the top 12% of the Zacks Industry Rank. Since the computer storage devices industry is ranked in the top half of the Zacks Ranked Industries, we expect it to outperform the market over the next three to six months.
At this stage, we recommend two storage devices stocks with attractive multiples and huge short-term price upside potential. These are Super Micro Computer Inc. SMCI and Western Digital Corp. WDC.
Computer Storage Devices Industry Thriving
Broader storage options from collocated hardware (such as hard disks and tape drives) to many cloud storage solutions have put the industry on a growth trajectory. The industry players are well-positioned for growth owing to a rapid increase in data, the complexity of data formats, and the need to scale resources at regular intervals.
These companies rely on AI for IT Operations (AIOps) and machine learning (ML) to manage and optimize storage solutions. To streamline data storage, companies are relying on virtualization technologies. As more data is added from IoT, companies are turning to edge computing architecture to reduce latency and boost flexibility.
Kubernetes storage is becoming increasingly popular as it facilitates greater agility and scalability. This has bolstered the deployment of high-capacity mass storage products, a positive for industry players.
Super Micro Computer Inc.
Super Micro Computer is a total IT solution manufacturer for AI/ML (machine language), Cloud, HPC, Storage and 5G/Edge technologies. SMCI’s rack-scale plug-and-play Total AI and IT Solutions (especially the Deep-Learning and LLM-optimized ones based on NVDA’s HGX-H100) are gaining substantial traction.
SMCI’s servers are optimized for NVDA’s high-performance graphics processing units, including the flagship Blackwell platform. This platform is expected to power the next generation of AI clusters and hyperscale data centers, providing SMCI with a profitable growth avenue.
SMCI’s liquid-cooled server solutions are gaining momentum as they address the power and thermal challenges pertaining to large-scale AI workloads. Its focus on modular and rack-scale solutions also enables customers to scale efficiently, driving repeat business and boosting customer retention. SMCI currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Solid Estimate Revisions for SMCI Stock
Super Micro Computer has an expected revenue and earnings growth rate of 59.2% and 15.4%, respectively, for the current year (ending June 2025). The Zacks Consensus Estimate for current-year earnings remained the same in the last seven days.
It has an expected revenue and earnings growth rate of 46.6% and 30.6%, respectively, for next year (ending June 2026). The Zacks Consensus Estimate for next-year earnings has improved 11.7% in the last 30 days.
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Excellent Valuation SMCI Shares
Super Micro Computer has a P/E ratio of 12.4X compared with 11.4X of the industry and 17.4X of the S&P 500. It has a P/S ratio of 0.9X compared with 1.4X of the industry and 2.8X of the S&P 500. It has a P/B ratio of 3X compared with 6.7X of the industry and 3.3X of the S&P 500. SMCI has a return on equity (ROE) of 26.5% compared with 15.7% of the industry and 17% of the S&P 500.
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Enormous Short-Term Price Upside Potential for SMCI Stock
At present, the stock price of SMCI is trading at a massive 68.9% discount to its 52-week high. The average short-term price target of brokerage firms represents an increase of 76.8% from the last closing price of $31.50. The brokerage target price is currently in the range of $15 to $100. This indicates a maximum upside of 217.5% and a downside of 52.4%.
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Western Digital Corp.
Zacks Rank #2 (Buy) Western Digital is well-positioned to benefit from increasing sales momentum across the Cloud end-market, fueled by elevated demand for nearline HDDs. Lower operating expenses, stemming from lower synergy costs, are driving its margin performance.
Solid AI uptake is likely to drive storage demand for Flash and HDD in the near term. To further expand its Flash business, the company has formed a separate entity, Sandisk. Western Digital is poised for significant growth in 2025 fueled by upbeat demand from major cloud providers, stemming from advancements in AI.
WDC expects the proliferation of generative AI-driven storage deployments to result in a client and consumer device refresh cycle, and boost content growth in smartphone, gaming, PC and consumer in the long run. Increasing AI adoption is likely to drive increased storage demand across both HDD and Flash at the edge and core, thereby providing ample business opportunities. Gen AI adoption surged to 65% in 2024 from 33% in 2023.
As demand grows, high-bandwidth memory (HBM) becomes key for AI servers, while NAND flash remains vital for storage, powering SSDs for text, images and videos. Gen AI adoption is driving eSSD sales due to its speed, reliability and efficiency over HDDs. Growing AI data boosts demand, fueling eSSD market growth and reshaping storage.
Strong Estimate Revisions for WDC Stock
Western Digital has an expected revenue and earnings growth rate of 25.7% and more than 100%, respectively, for the current year (ending June 2025). The Zacks Consensus Estimate for current-year earnings remained same in the last seven days.
It has an expected revenue and earnings growth rate of 31.4% and 73.6%, respectively, for next year (ending June 2026). The Zacks Consensus Estimate for next-year earnings has improved 11.5% in the last seven days.
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Impressive Valuation WDC Shares
Western Digital has a P/E ratio of 6.7X compared with 11.4X of the industry and 17.4X of the S&P 500. It has a P/S ratio of 0.8X compared with 1.4X of the industry and 2.8X of the S&P 500. It has a P/B ratio of 1.1X compared with 6.7X of the industry and 3.3X of the S&P 500. SMCI has an ROE of 15.7% compared with 15.7% of the industry and 17% of the S&P 500.
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Astonishing Short-Term Price Upside Potential for WDC Stock
At present, the stock price of WDC is trading at a huge 40.5% discount to its 52-week high. The average short-term price target of brokerage firms represents an increase of 85.7% from the last closing price of $36.51. The brokerage target price is currently in the range of $40 to $100. This indicates a maximum upside of 174% and no downside.
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