Bring up the stock market and Nvidia is sure to be mentioned, but the hottest companies of the year are actually a lot more old-school: 1970s-era hard-drive makers.
Driving the news: Seagate Technology and Western Digital, rival manufacturers of hard disk drives, are the second-and third-best performing stocks in the S&P 500 this year, up 152% and 137%, respectively.
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Sandisk, a flash drive maker owned by Western Digital that trades on the Nasdaq, is up 169% this year.
Why it’s happening: We may know these companies as makers of those external hard drives sitting around the house filled with photos we’ll likely never look at again, but investors see them as the next big winners from the AI boom.
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AI systems are trained on and generate enormous amounts of data, and these companies make the drives it’s often stored on.
Why it matters: The meteoric rise of data storage companies suggests investors feel shares in direct AI beneficiaries, like Nvidia, are getting expensive.
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“When people start looking for those secondary and tertiary trades because the leadership group has gotten so expensive, that to me says you’re in a very late stage in the cycle,” one analyst told Bloomberg.
Bottom line: So long as investors continue buying into the AI trade, data storage companies will likely keep producing solid earnings. The question is whether their good fortunes are an early warning sign of a market in bubble territory.—TS