Western Digital vs. Teradata: Which AI Data Stock Has Stronger Upside?

AI is creating a new investment opportunity across the data infrastructure stack. While much of the market’s attention remains focused on GPUs and networking, the rapid expansion of AI workloads is also driving demand for persistent storage, data management and analytics. Two companies positioned in different parts of the storage ecosystem are Western Digital Corporation WDC and Teradata TDC.

Per a report from Fortune Business Insights, the global AI infrastructure market is estimated to grow from $75.4 billion in 2026 to $497.98 billion by 2034, representing a CAGR of 26.6%. Western Digital is benefiting from the physical storage needs created by AI and hyperscale data centers, while Teradata is trying to capitalize on the growing need to organize, govern and operationalize enterprise data for AI.

In short, the AI boom needs both companies. But for investors, which stock offers more upside?

The Case for WDC Stock

AI training, inference and agentic applications all create data that needs to be stored. Much of that data does not need to reside permanently on expensive high-performance storage. High-capacity HDDs can provide a comparatively cost-efficient solution for persistent data. That dynamic is already visible in Western Digital's financial performance. It reported $3.75 billion in revenue for the fiscal fourth quarter, representing 44% year-over-year growth, while full-year revenue reached $12.92 billion, up 36%. Full-year non-GAAP operating income increased 107%.

Western Digital is benefiting from the rapid growth of AI, cloud computing and data-intensive applications, including autonomous vehicles, robotics and physical AI. Rising synthetic and video data is further supporting long-term storage needs. To capitalize on this opportunity, Western Digital is expanding its product portfolio. The company has begun volume shipments of 40TB ePMR drives and remains on track to ship 44TB HAMR drives in the first half of 2027. UltraSMR is also expected to reach around 60% of nearline shipments by the end of fiscal 2027, helping improve capacity and customer TCO.

Pricing trends remain favorable, with price per terabyte rising in the high teens year over year, supported by long-term agreements extending into 2029-2031 and tight supply. Also, cost per terabyte declined 8% year over year in the fiscal fourth quarter, with a long-term target of roughly 10% annual reductions. These trends, along with product mix improvements and operational efficiencies, helped gross margins reach 54.4%. WDC also has strong demand visibility, with LTAs extending through 2031. Hyperscalers remain the primary source of nearline demand, while neocloud providers, frontier AI labs, autonomous-vehicle companies and enterprise OEMs offer additional growth opportunities, particularly in Asia and China.

It ended fiscal 2026 with strong cash generation and a net cash position, providing flexibility to fund its HDD roadmap while returning capital to shareholders. The company returned $3.1 billion to shareholders during the year, including $1 billion in fiscal fourth quarter share repurchases and $54 million in dividends. At fiscal 2026 year-end, WDC had about $1.6 billion in cash against $1.1 billion of debt, leaving roughly $500 million in net cash.

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Nonetheless, WDC is plagued by customer concentration and technology transitions. Cloud customers accounted for 89% of quarterly revenue, making quarterly results sensitive to the purchasing schedules and product mix of a limited group of large buyers. While LTAs through 2029-2031 improve demand visibility, changes in orders, pricing or technology adoption could still affect revenue and margins. Competition from other storage technologies adds further pressure.

The Case for TDC Stock

TDC’s strategy revolves around cloud analytics, enterprise data management, governance and AI. As companies deploy more AI agents and applications, the amount of enterprise data that must be governed, contextualized and accessed by those systems should increase. Teradata delivered a solid first half, with growth in ARR, recurring revenue and free cash flow, while reaffirming full-year guidance and raising its non-GAAP EPS outlook to $2.65-$2.73 and free cash flow guidance to $330-$350 million. Second-quarter revenue was $410 million, recurring revenue rose 3% and free cash flow reached $127 million, supported by a stronger balance sheet and disciplined cost management.

The company is strengthening its AI and cloud strategy through the Autonomous Knowledge Platform, AI Studio, Teradata Cloud and Teradata Factory. These offerings help enterprises deploy agentic AI across cloud, on-premises and sovereign environments while maintaining data control and governance. Early adoption is emerging across banking, telecom, healthcare and government, particularly in sectors where data sovereignty and complex AI workloads are critical. Teradata’s on-premises, GPU-enabled architecture could provide a competitive advantage in regulated industries, while new software capabilities offer additional growth opportunities as adoption expands.

The company is positioning its hybrid data platform for the next phase of enterprise AI with the launch of its Autonomous Knowledge Platform, designed to help businesses deploy agentic AI. Enterprise AI increasingly depends on more than computing power. Companies need reliable access to structured and unstructured data, governance, context and systems that allow AI agents to retrieve and act on information. Teradata is attempting to address this need by combining its data-management capabilities with tools designed for agentic AI. This could strengthen Teradata's competitive position as enterprises move from experimental generative AI projects toward production-scale AI deployments.

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However, broader market rollout is expected to take time, and cloud ARR growth and migrations remain uneven. Despite the positive second-quarter results, Teradata's third-quarter outlook suggests that the near-term operating environment remains challenging. The company expects recurring revenue to decline 2% to 4% year over year, while total revenue is projected to fall 4% to 6%. Non-GAAP EPS is expected to be between 55 cents and 59 cents. These projections indicate that Teradata's transformation is not yet producing consistent revenue acceleration.

Price Performance and Valuation for TDC & WDC

Over the past year, TDC and WDC have registered gains of 33.9% and 446.2%, respectively, compared with the Zacks Computer-Storage Devices industry’s rise of 394.5%.

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Going by the price/earnings ratio, TDC’s shares currently trade at 14.44 forward earnings, lower than 19.92 for WDC.

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Western Digital has been one of the standout AI-related hardware performers in 2026, and its valuation and expectations have risen accordingly. WDC needs to keep delivering extraordinary growth to justify elevated expectations.

How Do Zacks Estimates Compare for TDC & WDC?

The Zacks Consensus Estimate for TDC’s earnings for fiscal 2026 has been revised north 1.5% to $2.69 over the past 60 days.

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WDC’s estimate revisions are currently on an upward trajectory. The Zacks Consensus Estimate for its earnings for fiscal 2027 has been revised upward by 9.3% to $20.03 over the past 60 days, while the same for fiscal 2028 has gone up 7.6% to $34.74.

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WDC or TDC: Which Stock Has More Upside?

Western Digital is the stronger AI data stock for investors prioritizing fundamental momentum and direct exposure to the AI infrastructure cycle. Its combination of hyperscale demand, expanding storage requirements, improving margins and strong cash generation gives it a clearer path to earnings growth. Teradata, however, could deliver greater percentage upside if its AI transformation succeeds. The company has an attractive position in enterprise data, and the proliferation of AI agents could increase the importance of governed, contextualized corporate information.

For an investor looking for the higher-probability AI data play, WDC currently has the edge and potential to bolster your portfolio. WDC at present carries a Zacks Rank #2 (Buy), while TDC has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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