The Motley Fool·2025-10-03 07:55Core Insights - The article highlights the significant growth in earnings for companies providing essential AI infrastructure, particularly focusing on Palantir Technologies and hard drive manufacturers Seagate Technology and Western Digital [1][2][3]. Company Performance - Palantir Technologies has experienced rapid software adoption, especially among enterprise customers, leading to strong revenue growth and a 143% stock increase year-to-date [2]. - Seagate Technology reported a 52% year-over-year increase in nearline capacity shipments, while Western Digital saw a 36% increase [7]. - Both Seagate and Western Digital have exhibited strong revenue growth and margin expansion, with Seagate's gross margin expanding by 7 percentage points and Western Digital's by 6.1 percentage points [8]. Earnings Growth - Seagate's earnings per share climbed 147% year-over-year last quarter, while Western Digital's operating income for its remaining business also increased by 147% year-over-year [9]. - The demand for hard drives, particularly for nearline storage, has surged due to the growing need for data storage in AI applications [5][6]. Market Dynamics - The hard drive industry is cyclical, and while current earnings are strong, there is a risk of a downturn as high fixed costs may impact future profitability [10]. - Long-term spending commitments from major AI players, such as OpenAI's $400 billion investment in data centers over the next three years, may extend the current cycle [11]. Competitive Advantage - Seagate expects to enhance its price advantage in 2026 through its heat-assisted magnetic recording (HAMR) technology, while Western Digital is slightly behind in scaling its next-generation technology [12]. - The forward P/E ratios for Seagate and Western Digital are 22 and 18, respectively, indicating that while they may appear cheap compared to other AI stocks, they are relatively expensive compared to their historical valuations [13].