Western Digital (WDC) shares have been an immensely lucrative investment in 2026, currently up 250% year-to-date on insatiable demand for AI data center storage and a sold-out HDD inventory.
But discipline is the cornerstone of successful investing; while the hardware boom paints a “rosy” macro picture, a look under the hood suggests the WDC rally may have decoupled from reality.
There are reasons to believe that Western Digital stock is poised for a near-term pullback, which makes now the perfect time to take profit.
Western Digital stock is now expensive to own
At the time of writing, Western Digital stock is trading at a rather stretched forward price-to-earnings (P/E) multiple of more than 58x.
Investors use P/E multiples to assess a company’s valuation relative to its expected future earnings, and with the rise of online trading platforms, tracking these metrics has become much more accessible.
For context, WDC stock currently trades at a significantly higher earnings multiple than AI giant Nvidia, which commands a far more reasonable forward P/E of around 24x.
And that’s when Nvidia controls the higher-margin compute layer of the AI revolution, while WDC plays in the lower-margin storage hardware space.
So, Western Digital is essentially making you pay a premium that heavily outstrips the core engine of AI growth—and that’s a fundamental mismatch.
Options pricing and technicals signal a near-term pullback
Investors should note that at the current valuation, options pricing is beginning to turn more dovish on Western Digital shares as well.
According to Barchart, the put-to-call ratio on contracts expiring late July sits at 1.92 currently – indicating a strong bearish skew.
And the lower price on those contracts is set at about $617 at writing, signaling potential for over 10% decline in WDC over the next four-to-six weeks.
Crucially, this bearish sentiment is echoed in technicals. Western Digital’s relative strength index (RSI) has already climbed into the early 70s, indicating “overbought” conditions.
Such a technical setup often triggers algorithmic selling in the near-term.
WDC shares have gotten ahead of themselves
The stock market is a game of expectations, and right now, Western Digital has absolutely no room for error.
With WDC stock hovering around $700, the market seems to have pulled years of “future growth” into the present.
Disciplined investors should note that cyclical hardware demand can cool just as quickly as it heats up, and any future supply chain normalization or capital expenditure slowdown from big tech may trigger a massive correction.
Western Digital has handed investors a life-changing 200% return in a matter of months – but pigs get fat, hogs get slaughtered. So, it may now be time to lock in those spectacular gains and exit the position.
Investors should also note that analysts—while maintaining their “Strong Buy” rating on WDC – have the highest price target set at $685 currently.
This means the AI infrastructure stock is already trading above the most ambitious Wall Street estimate.
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