The Motley Fool·2026-01-20 08:30Core Insights - Several top hedge fund managers have purchased shares of Nvidia and Western Digital in Q3, indicating confidence in these stocks despite their significant price increases since January 2023 [1][2]. Nvidia - Nvidia has seen a remarkable return of 1,180% since January 2023, driven by its leadership in graphics processing units (GPUs) and a full-stack strategy that includes data center hardware and software development tools [3][4]. - The company optimizes data center performance by integrating GPUs with CPUs and networking gear, which simplifies infrastructure for customers [5]. - Nvidia's total cost of operation (TCO) is competitive, making it difficult for cheaper alternatives to gain traction, suggesting sustained dominance in AI infrastructure [6]. - Wall Street estimates Nvidia's adjusted earnings will grow at 67% annually through the fiscal year ending January 2027, with a median target price of $250 per share, implying a 33% upside from the current price of $187 [8]. Western Digital - Western Digital has increased by 830% since January 2023, focusing on data storage devices across various markets, particularly hard disk drives (HDDs) [9][12]. - The company leads in HDD shipments, with data center HDD sales projected to grow at 22% annually through 2030, driven by AI infrastructure demand [11]. - In Q1 of fiscal 2026, Western Digital reported a 27% revenue increase to $2.8 billion, with non-GAAP earnings rising 137% to $1.78 per diluted share [12]. - Wall Street estimates adjusted earnings will grow at 26% annually through the fiscal year ending July 2027, with a current valuation of 34 times earnings appearing reasonable [13]. - However, concerns exist regarding the cyclical nature of the HDD market, with potential oversupply following the current shortage, which could lead to lower future earnings expectations and a median target price of $200 per share, indicating a 10% downside from the current price [14].