Western Digital's AI Storage Edge Faces Twin Threats as Apple Sourcing Shift and Cloud Cuts Loom

Western Digital's stock, up 213% YTD, faces dual threats from Apple's potential CXMT partnership and cloud providers' AI spending cuts, despite full order books and next-generation HAMR technology.

The narrative driving Western Digital's spectacular run is hitting a fork in the road. While the company's hard-disk capacity for hyperscale data centres is spoken for through the end of the year, two fresh headwinds have spooked the market. Apple is reportedly exploring a memory partnership with Chinese supplier CXMT, threatening the pricing power that Western Digital and its peers have enjoyed. At the same time, major cloud providers are signalling a pullback in capital spending on artificial intelligence infrastructure. The shares, which closed Friday at €501.80, sit 28% below their all-time high.

The scale of the rally that preceded this cooling is extraordinary. The stock has added 213% so far this year and 792% over the trailing twelve months, according to market data, while another analysis puts the twelve-month gain at 793%. Yet the annualised volatility stands at 102%, underscoring the binary nature of the investment case. With a market capitalisation of €180 billion, Western Digital's valuation is under the microscope.

The case for the bulls: full order books and next-generation hardware

Optimists point to an industrial reality that is hard to dismiss. Production capacity for enterprise-grade hard drives is completely sold out until December, insulating Western Digital from an immediate price slide. The company is expanding its footprint in Sarawak, Malaysia, where it will manufacture glass substrates for HAMR (heat-assisted magnetic recording) technology — a laser-driven process that squeezes enormous data volumes onto each platter. This is precisely the kind of ultra-high-capacity storage hyperscalers need for AI workloads.

The product roadmap is accelerating. First customers are already testing drives with 40 terabytes of capacity, with series production scheduled to begin in the second half of the year. Western Digital expects to cross the 100-terabyte threshold in 2027. Meanwhile, partners Kioxia and SanDisk kicked off production of the latest memory generation on 3 July 2026, adding another layer of supply-chain security. Chart technicians note that the share price remains above its 50-day moving average of €468.21, a level that has provided support in recent pullbacks.

The bearish counterpoint: an investment pause and a China price war

JPMorgan analysts are growing cautious on the broader storage infrastructure market, warning that the big cloud operators could slow their spending growth from 2027 onwards. A more immediate risk comes from Apple's potential move to source memory from CXMT. If that deal materialises, it could trigger a wave of price erosion that eventually seeps into the lucrative enterprise storage segment. Even star investor Michael Burry has taken a bearish position against Western Digital rival Micron, signalling that the memory cycle may be peaking.

The consensus price target of €515.49 suggests only modest upside from current levels. Should the stock break below €450 — a psychological threshold — the next logical support would be the 200-day moving average at €254.72, a decline that would wipe out most of the year's gains.

The next catalyst: price updates from TrendForce

The third quarter will bring an important reality check. TrendForce, the independent memory analyst, expects price increases for enterprise storage to decelerate to below 20%. That would mark a sharp slowdown from the double-digit jumps of recent quarters. Whether Western Digital's full order book can shield it from the broader price normalisation is the question that will determine the stock's trajectory for the remainder of the cycle.