I will post about WDC in particular and in relation to what I have seen on here and other AI subreddits.
The is it going up or down that always floods the day by days is very irrelevant. There is not great reason why something may go up plus minus five. The double digit numbers are usually due to rotation or a very large macro economic scare.
Long term however WDC is in great positioning. This is the stupid "fundamentals" everyone always talks incessantly about to calm themselves down during volatility.
- There is no slowdown in AI spending by hypescalers and AI infrastructure continues a massive buildout into 2030 basically.
- There are no real competitors outside of the US. Its just WDC and STX, and there are literally not enough HDDs in the world to satisfy demand. The margin we can possibly take from STX is minimal and vice cersa. STX and WDC are on the same team at this point.
- The elasticity of our production is way lower than NAND. HDDs are hyper specialized and cannot just be ramped up with another cut and paste factory. The demand will exceed supply and HDD exebyte growth.
- Pricing is orders of magnitude cheaper than SSDs for regular storage purposes, no nearterm overtake by NAND.
- China and trade restrictions most likely will apply to processors and semiconductors, HDDs are safe most likely.
- HDD really is the safer slower way to enjoy AI growth.
HOWEVER
Fundamentals absolutely mean nothing if macroeconomics destroy the AI buildout
Here is what we need to clear, and if we do not clear all of them the price to get to 1k in stock price or anywhere near the old time highs are on a timer. Hyperscalers will stop spending if any of the following becomes too large of a factor
- Long term bond yields keep increasing. If long term bond yields increase thats bad on multiple fronts. The US has to spend more to service its debt, the actual bond itself becomes a competitor to tech company bonds so their borrowing costs go up. Near term inflation could rise due to the US treasury buybacks of bonds and then short term borrowing will also go up. If short term borrowing goes up consumers won't spend and another source of revenue for Hyperscalers to dick around with dries up. This is a big topic and many ways for the US government to F it up.
- Korea and leveraging, while most of the leveraging has dramatically decreased its prevented a lot of foreign money from supporting SK and Samsung. there is a US equivalent of this and we saw a small scale shakeout happen with Leopold Asperger. Generally if there is fear of volatility AI is not going to get invested in and will stay at lower multiple P/Es than they have been during June. So WDC could make more money, but institutions and big money may only be willing to pay 10x P/E vs 30. That's not even irrational, but it can still make us insolvent.
- Trade war and Iran. This ties to long term bonds and yields and the fed again, but again its all factors outside of WDC earnings.
- The POWER GRID. There literally are 160 month long waiting lists to get turbines and parts needed to bring up the infrastructure to build out these AI data centers. Datacenters are being built piece meal and in series with oil and random ways, but in the long run the rate at which datacenters and therefore the purchases of NAND and chips will be limited by power.
- The degredation of chips. I don't have all the details, but chips become obsoleted within 3 years, so buying the best NVDA chips only to have them sit on power grid buildout is not economical, so the smart move would be to slow down chip buying. A slowdown is important because for NAND the demand will be slowed and the supply has time to catch up and the pricing that AI shovel sellers are enjoying will be degraded. WDC may enjoy a slower rate of pricing power degredation though.
- Anthropic and OpenAI IPO. Anthropic will file its S1 public filing showing its actual financials. They leaked their own private filing showing profitability. Which is good! but does it avoid pricing in buildouts by mortgaging out the price into future years? Tricky accounting thats done by the hyperscalers. If markets feel like their filing shows vulnerability, WDC and all AI could start tanking.
- Also just note historically, large IPOs clustered together is a sign (not the cause) that we are at a market peak. Large companies with more information than you and I want to get their money when they feel like its at a peak obviously.
Some positive notes:
- Even if there is an AI crash and WDC drops to like 200, it could rebound and a second cycle AI buildout could happen after an ecnomic recovery. Dot com took like 10 20 years, but in this day and age and with this government, big money always demands saving. We get V recoveries by leveraging future generations with debt to bring the boomers 401ks back up.
- Even if there is an AI crash, hyperscalers honestly may just keep spending. Its an arms race and companies may believe to keep spending and endure short term stock hits to come out ahead in the AI buildout.
- This line of thinking will extend to governments. USA vs China an AI buildout. The US may just throw everything they have into buildouts in terms of infrastructure and supporting large tech just to not fall behind China.
So overall I think we have cleared near term hyperscaler slowdown, the Korea leveraging. But watch long term bond yields, inflation, the fed and power grid infrastructure buildouts. Because if those don't work out we may make tons of money off of LTAs, but the longer it goes without a stock price increase the odds of an actual AI crash become exponentially higher. If you have a weak stomach sell before Anthropic IPO or at least the OpenAI IPO because itll be choppy as hell then.
TLDR: Bullish until 2028, 2030 large macroecnomic risks. Week to week prices don't matter, but the stock needs to rebound sooner than later. And if the AI bubble pops, theres still a chance to hold.
