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Western Digital and Seagate Surge as AI Infrastructure Demand Fuels Record Gains

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Shares of data storage leaders Western Digital and Seagate have skyrocketed this year, outpacing the broader market as global demand for AI-driven infrastructure fuels unprecedented growth in hard drive sales. Both companies’ stocks have surged over 200% in 2025, reaching record highs amid a worldwide scramble to expand data storage capacity for artificial intelligence applications.

Western Digital shares rose more than 11% on Friday after the company forecast second-quarter earnings above Wall Street estimates. Analysts at J.P. Morgan noted that Western Digital has secured purchase orders from five of its largest customers through 2026, signaling strong confidence in sustained AI-related demand.

Seagate, a close rival, also projected revenue and profit above expectations earlier this week, pushing its stock up more than 22%. Both companies are now among the top three performers in the S&P 500 this year, trailing only Robinhood.

Smaller competitor Sandisk, spun off from Western Digital in February, has seen its shares soar fivefold since its debut and was up another 3.6% on Friday ahead of its upcoming earnings report.

The S&P 1500 tech hardware, storage, and peripherals sector—which includes all three companies—has climbed more than 12% this year, hitting an all-time high. As major tech firms like Alphabet, Microsoft, Meta, and Amazon ramp up capital spending on chips and data centers, analysts expect global AI infrastructure investments to reach up to $4 trillion by 2030.

Netflix Shares Fall 5.6% After Brazilian Tax Dispute Hits Quarterly Earnings

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Netflix (NFLX.O) shares dropped 5.6% in after-hours trading on Tuesday after the streaming giant missed Wall Street’s third-quarter profit estimates due to an unexpected $619 million tax expense in Brazil. Despite record ad sales and a promising year-end outlook, the extra charge dragged down earnings and overshadowed otherwise steady revenue growth.

For the quarter ending in September, Netflix reported net income of $2.5 billion, or $5.87 per share, missing analyst forecasts of $3 billion and $6.97 per share, according to LSEG data. Revenue met expectations at $11.5 billion, while operating margin reached 28% — a figure that would have exceeded 31.5% without the one-off tax payment.

The setback comes as Netflix pursues growth beyond streaming through advertising and video games, competing with YouTube, Amazon Prime Video, and Disney+. Analysts said the tax issue weighed on investor sentiment, though the company’s fundamentals remain strong. “All things considered, this was another robust quarter, despite a blip due to an unforeseen expense,” said PP Foresight analyst Paolo Pescatore.

For the fourth quarter, Netflix projected revenue of $11.96 billion, slightly above Wall Street’s $11.90 billion forecast, and earnings per share of $5.45, one cent ahead of estimates.

Executives also addressed ongoing industry consolidation, saying Netflix would remain selective. Co-CEO Ted Sarandos said the company has “no interest in owning legacy media networks” but may consider acquiring intellectual property. Co-CEO Greg Peters added that competitors’ mergers would not affect Netflix’s competitive position.

The company said it delivered its strongest ad-sales quarter to date, though it did not disclose figures. Analysts believe subscription fees will continue to drive the bulk of Netflix’s growth. “Sustained revenue growth will predominantly come from subscriptions,” said eMarketer’s Ross Benes.

Netflix will end 2025 with a packed lineup, including the final season of “Stranger Things” and two live NFL games on Christmas Day. “We’re finishing the year with good momentum and an exciting Q4 slate,” the company said in its shareholder letter.

Investors weigh risks that could derail Wall Street’s AI-driven rally

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Artificial intelligence has fueled a powerful stock market rally since 2022, but investors are increasingly alert to the potential risks that could threaten the “AI trade” underpinning record market highs. Citigroup estimates nearly half of the S&P 500’s $57 trillion market capitalization now has “high” or “medium” exposure to AI, making the technology a defining force on Wall Street.

The S&P 500 is up 13% this year, while the Nasdaq Composite has gained 17%, driven largely by tech and AI-linked companies. Yet analysts warn that the sector’s strength also makes it vulnerable to shocks. Concerns have surfaced before — from China’s launch of the low-cost AI model Deepseek to fears about runaway spending on data centers — though markets have repeatedly rebounded.

“There’s a lot of growth priced in,” said Steve Lowe of Thrivent Financial. “That’s the concern — whether the expectations can really hold up.”

Massive capital spending remains a central focus. Barclays projects that annual AI-related infrastructure investment by major “hyperscalers” — including Microsoft, Amazon, Alphabet, Meta, and Oracle — will double to $500 billion by 2027. While these companies generate vast cash reserves, analysts caution that overspending could pressure margins or lead to greater leverage.

Others highlight systemic risks from the close financial ties within the AI ecosystem, such as Nvidia’s recent $100 billion commitment to OpenAI. Energy infrastructure is another growing concern, with power supply seen as a potential bottleneck for new data centers.

Some investors remain bullish over the next 12 to 18 months, but warn that any slowdown in AI spending or signs that investments aren’t yielding expected returns could shake market confidence. “If it starts to look like the payoff isn’t coming,” said Patrick Ryan of Madison Investments, “that could be what finally trips the trade.”