CASE STUDY: WESTERN DIGITAL AND 252 PERCENT IN 9 MONTHS

Western Digital (WDC) was somewhat overshadowed by all the excitement surrounding cloud computing and artificial intelligence in early 2025. While investors were primarily focused on chipmakers and the most obvious winners of the AI revolution, we looked a few steps further down the value chain – at the infrastructure without which the AI boom simply cannot exist. And that is where we saw an opportunity that we believed others were overlooking. The result? A 252% return in 9 months. In nominal terms, approximately USD 2 million.

Artificial intelligence as a catalyst for HDD market growth

The rapid expansion of artificial intelligence and data centers is dramatically increasing demand for high-capacity storage. Thanks to their cost efficiency and scalability, HDDs remain a key solution for storing enormous volumes of data. At the time, WDC projected that annual data generation would reach 394 ZB by 2028, while installed cloud storage capacity would grow at a rate of 23% (source: https://investor.wdc.com/static-files/e16a6f3b-49af-4eea-90a2-6220aa24ebc3).

Our investment thesis, therefore, was not simply that “AI is growing.” We were looking for a less obvious part of the AI infrastructure ecosystem that stood to benefit from this trend – and, at the same time, for a company whose share price did not adequately reflect that potential.

An Opportunity in an Undervalued Stock

Alongside this powerful long-term trend, what we saw above all was an undervalued stock.

In our view, WDC was trading significantly below its fair value and offered an attractive risk-reward profile. That is why, during Q1 2025, we built our position at an average purchase price of USD 45.71 per share.

Our investment thesis was simple: buy a quality asset when we believe its market price does not reflect its underlying value, and wait for the market to recognize the gap.

Then HDD Demand Exploded

What followed exceeded our original investment thesis. And we were not the only ones caught by surprise. The pace of demand growth surprised Western Digital itself. Global demand for high-capacity HDDs, driven by hyperscalers, data centers and AI infrastructure, began accelerating at such a pace that the company’s original financial forecasts could effectively be thrown out of the window.

What we had initially viewed as a long-term structural trend began translating directly into the company’s financial performance within a matter of months. Western Digital reported growing volumes, higher average selling prices and significant margin expansion. The company’s fundamentals were improving faster than even management itself had anticipated.

And the market took notice. Within a matter of months, an overlooked hard drive manufacturer had become one of the indirect beneficiaries of the AI infrastructure investment boom.

From “Undervalued” to “Fairly Priced”

As the share price increased, however, the economics of our investment changed as well.

We did not buy WDC because we believed its shares would keep rising indefinitely. We bought it because we saw a significant gap between the company’s market price and its underlying value.

Once that gap closed, it was time to move on. In our view, a significantly undervalued stock had become a fairly priced stock. In November 2025, we therefore exited our position at an average selling price of USD 160.85 per share, representing a return of approximately 252%. In nominal terms, approximately USD 2 million.

We did not sell because we had stopped believing in Western Digital or in the long-term growth of global data volumes. One fundamental thing had changed: The price.

And so we started looking elsewhere. Next stop: Xerox Holdings Corporation.

Thank you all for your trust.

The STARTEEPO Team

Disclaimer

The information contained in this article was prepared by STARTEEPO s.r.o., with its registered office at Plynarni 1617/10, Prague (“the Company”), which is the 100% shareholder of STARTEEPO Invest, investiční fond s proměnným základním kapitálem, a.s. The Company draws information from reliable sources and has exercised reasonable care to ensure that the information is not false or misleading; however, it does not guarantee its accuracy in any way. This material is intended solely for promotional purposes and does not replace the fund’s prospectus. It is intended as preliminary information and does not replace professional advice on financial investments or comprehensive risk disclosure. The information provided herein does not constitute an offer or solicitation to buy or sell financial instruments. Investment decisions may only be made based on the current version of the fund’s articles of association. Past performance is no guarantee of future results. This document has been prepared with due care and attention; however, the company makes no guarantees regarding its accuracy, correctness, timeliness, or completeness. The content of this document is protected under copyright law; the company is the copyright holder. The Company is not liable for the dissemination or publication of information by third parties.